Employers Can Do More to Help Workers Avoid Missteps When Choosing a Health Plan

A new study by the Pacific Business Group on Health reveals that most workers don't understand the terminology used by health plans and aren't able to accurately figure out which plan will offer them the most benefits at the least cost.

June 19, 2012

Consumers often make poor choices when it comes to selecting a health plan, and benefits managers can do more to help them get the most out of their insurance, shows a new report by the Pacific Business Group on Health.

The San Francisco-based not-for-profit group, which represents large companies throughout the western United States, identified several key areas in which employers nationwide can help workers better choose a health plan.

These areas are also important when it comes to developing state-based health insurance exchanges, which under the existing federal health care reform law are slated to launch in 2014. In these exchanges, individuals and small businesses will be able to purchase health insurance policies. Pacific Business Group is working with California to develop tools for consumers to make smart choices when selecting a health plan in the exchange.

Consumer focus groups and surveys of large employers show that most people simply don't understand the terminology used by health plans and aren't able to accurately figure out which plan will offer them the most benefits at the least cost, says Ted von Glahn, senior director at Pacific Business Group.

"The probability that they can get it wrong is very high," von Glahn says.

For one, health savings accounts and health reimbursement arrangements make the difficult task of choosing a health plan even harder, the group says.

"People don't know what they are," von Glahn says. "How they integrate with health plan coverage is perplexing to a lot of people."

The organization suggests that benefits managers provide yearly estimates of medical costs based on expected utilization. They should also take into account employer contributions to health savings accounts, workplace wellness incentives and other ways workers can save money on health care costs. Personalized plan comparisons could also be helpful, the group says.

Consumers also get scared off by high-deductible health plans, even if a lower deductible combined with a high monthly premium ends up costing them more, Pacific Business Group has found. For instance, an individual may balk at a $1,200 annual deductible but end up paying far more than that over the year in monthly premiums.

Benefits managers can help by offering an online calculator to help determine total out-of-pocket costs for the year, for instance.

"People are adverse to uncertainty," von Glahn says. "Deductibles are scary to a lot of people. People don't even know what the word 'deductible' means. There's a whole insurance literacy issue."

Even those who understand the concept of a deductible can miscalculate their spending and savings on medical care, he says. "People struggle with math and they are particularly vulnerable to these issues."

Health plans rarely show members how to save money, Pacific Business Group says. Employers can help by offering personalized budgeting tools that incorporate contracted fees and member coverage and that present alternative treatments, care options and settings. Smartphone applications are available to alert the workforce to wise benefit use, care options and available cost savings, the group says in the report.

Sandy Ageloff, health and group benefits leader at Towers Watson & Co. in Los Angeles, agrees that employees are leaving money on the table in the form of wellness incentives, health reimbursement accounts and the like.

"There are opportunities to earn money and many employees overlook them," Ageloff says.

At the same time, many employees don't look carefully at co-payments for such services as emergency-room visits and inpatient care, Ageloff says.

"It's not just what comes out of your paycheck that matters," she says. "It's the bigger picture of utilization and each family's needs."

Physician choice matters to many people, but consumers don't know where to find the information or how it relates to plan coverage, Pacific Business Group says, and plan comparisons typically exclude it.

About 60 to 64 percent of consumers say having their doctor included in their health plan is important to them, says von Glahn of Pacific Business Group. Employers can integrate this information into plan choices and simplify searches by aggregating providers across plans into a single directory, the group recommends.

Insurers and employers can do more to make sure physician quality is included in plan choice information, Towrs Watson's Ageloff says. These so-called transparency tools are developing rapidly.

"Quality data is a huge opportunity for employers," she says.

Finally, not every employee has the same priority when choosing a health plan. Some care more about physician choice while others focus on overall cost or coverage for a specific drug or medical device, Pacific Business Group says.

"It's not just about the dollars," von Glahn says.

Benefits managers should communicate with workers about benefits year-round, not just during open enrollment, he says.

"There's no way people can absorb all this in one fell swoop," von Glahn says. "You need continual exposure to this."

Ageloff agrees.

"Benefits shouldn't be a once-a-year experience," she says. "You need to keep it alive all year."

Rebecca Vesely is a writer based in San Francisco. Comment below or email