Health Insurance: The Fallacy of Choice
“I never advise people which health insurance to pick or
whom to marry,” warned a seasoned managed care contract negotiator with whom I
worked at the outset of my career. For
years I repeated this snarky sound bite thinking she was referring to both as
highly personal decisions with serious consequences – until the day came in
fall of 2009 when I was faced with the task of choosing one of five very
different employer-sponsored health plans for my own family. At that point I realized that what she really
meant is that it is far easier to pick a spouse than a health plan (and I
should mention this was two years into my second marriage).
There are tens of millions of uninsured Americans who would
love to have had the luxury of this problem, plus many millions more feeling
constrained by limited options whether through their employer or individually
purchased – so I’m not complaining about my abundance of choice. Furthermore, I had a slew of highly atypical
credentials in my favor, including between my husband and me a law degree and two
MD degrees with decades of experience as practicing physicians, a Master’s degree
in public health, more than rudimentary spreadsheet skills, and most
importantly a household income high enough to mitigate the consequences of making
the wrong choice. At the time I was also the senior executive in charge
of the health plan owned by my health system employer. For the prior six years I had worked nearly
full time as a leader where providers and payers interface, and even taught doctors-in-training
about HMO’s, PPO’s, deductibles, co-pays, co-insurance, etc. Making the right choice for my family was a
matter of professional pride on top of potentially swinging our household’s
ultimate out of pocket cost of insurance and health care by tens of thousands
of dollars in either direction.
Armed with two thick envelopes containing open enrollment
materials from each of our employers, plus lengthy online legalese documents
with detailed benefit plan descriptions that few know exist, I sat down with my
laptop and confidence that I could make a solid choice supported by data - how
hard could it be?
First, the differences between the plans themselves: One employer was in Pennsylvania, where we also
lived, and one in New Jersey, so the two “fully insured” plans (i.e.
underwritten by the insurance company) were covered by extremely different
state regulatory environments (including regarding mandatory coverage of
important benefits). At least one
coverage issue that was relevant to our family was working its way through the
courts in one state, so that was an important unknown. Our employers “self-insured” the other three
plans (i.e. the insurance company serves only administrative functions such as
paying claims and contracting with networks) and those are regulated under
Federal law, at that time (pre-ACA) generally allowing employers quite a bit of
latitude on benefit design. One plan
allowed generous access exclusively to the health system where I worked. Two were HMO plans with broader (but mutually
different) networks and no out of network coverage except emergencies; one was
a PPO which included out of network coverage at a higher cost share; and one
was a consumer-directed HSA plan. The payroll
deductions for each plan, i.e. our share of the insurance cost, varied
substantially, but at least was an easy number to enter into the spreadsheet. Each plan had between one and three different
deductibles, copays, co-insurance, and out of pocket limits depending upon what
network was accessed, thus I had to think through over ten scenarios of health
care needs to understand the dollar differences. I quickly decided to abandon all thoughts of
modeling anything other than whole family coverage, e.g. picking one plan for
one parent plus kids and other for the other parent as an individual, a
potentially advantageous configuration under some scenarios.
Second, our family’s needs:
Three of us lived sixty miles from the health system where I worked. Three others were students in three different
states. Our blended family of kids also
had some potential secondary coverage from their other parents, but we could
not count on that as ours was court-ordered as primary in our previous divorce
agreements (and I could not begin to think about trying to add two more sets of
variables to the spreadsheet). One child
had a chronic illness that required our assembly of a care team years earlier
that did not accept any of the five health plans. We were willing and
thankfully able to keep that team in place but preferably with a plan that
reimbursed us at least somewhat for out of network services. However I could not estimate how much would
be reimbursed because each plan uses a different formula to determine that,
involving secret “usual and customary” charges. While we hoped hospital care would not be
needed, costly specialized hospitalizations had been required in the past so I
had to try to determine how that would play out under the five choices.
Similarly, medication lists had to be compared to various formularies and
preauthorization requirements. All of
this was only to estimate the somewhat predictable health care needs of the
family, not the unforeseen events which of course did end up happening, because
teenagers and middle age and stuff…
If you’ve read this far you are probably beginning to feel
like I did after many hours of this exercise when my husband finally suggested
that we “just pick one randomly” mainly to avert my impending meltdown. At least I was able to knock out two of the
contenders that would not meet our needs, due to geography and chronic
illness. Of the remaining three, there
were simply too many unknowns and complexities to do a side by side comparison
to answer two basic questions even barring unforeseen events: 1)
Which plan best meets my family’s known health needs, and 2) How much will our
health insurance and health care cost us under each plan?
For those of us who have this luxury of choice, there is
virtually no such thing as well informed consumer, and even in retrospect it
can be impossible to sort out. The cost of purchasing the insurance is
the most easily (sometimes only) comprehensible differentiator, yet if any health
care ends up being needed then the premium differences quickly become a
drop in the bucket. The wrong choice can
result in financial ruin and adverse health outcomes since being poorly insured
can be as bad as being uninsured (sometimes worse, since it may make one
ineligible for other forms of assistance).
Picking the first plan on the list or defaulting to last year’s choice
are probably the next most common methods that I hear. One’s doctor and
hospital being in the network influences choice, though people commonly switch
doctors for a $5 difference in visit co-pay.
I’m in a different job now, and am extremely grateful for generous
health benefits that more than meet my family’s needs – and having only one
choice is working fine for me. When I
get asked these days for advice on what health plan to choose, I no longer
deliver the opening one-liner, but I tell my story, and conclude with, “Good
luck.”
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