Insurance News

Proposal Would Aid Deciphering of Benefits

Posted on: August 30, 2011

WASHINGTON — The Obama administration proposed new rules on Wednesday that would require health insurance companies and employers to provide information to policyholders and employees describing health benefits, coverage and costs in plain English.

Kathleen Sebelius, the secretary of health and human services, said the new “summary of benefits and coverage” would make it easier for consumers to shop for insurance and compare plans.

The new forms, scheduled to be available next year, set disclosure standards for private health plans covering 180 million people.

Groups like Consumers Union said the new document could be a boon to consumers as they struggle to decipher the details of health insurance, which comes in a mind-boggling variety of configurations.

The White House compared the new information to the “nutrition facts” labels found on many packaged foods. Lynn Quincy, a health policy analyst at Consumers Union, likened the new document to the standard disclosure of information about credit cards and home mortgages.

Insurers said they supported the goal of the new rule, to educate consumers about their choices. But Robert E. Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group, said compliance could be expensive for insurers.

Employers choose many different benefit packages for their employees, Mr. Zirkelbach said, so insurers “could be required to create tens of thousands of different versions of this new document.”

The administration estimated that it would cost insurers and employers $50 million a year to compile and disseminate the required information.

As part of the new form, insurers and employers would have to itemize the costs that would be incurred by consumers needing certain services. These “coverage examples” would show how insurers cover the cost of having a baby, treating breast cancer and managing diabetes.

The government would specify the services and billing codes to be used in calculating costs in each case.

Kathryn Wilber, a lawyer at the American Benefits Council, a trade group for large employers, said, “Many of our members have been providing information about benefits and coverage in a very effective way.” But Ms. Wilber said, “The coverage examples are very new, and we do not have experience with them.”

In the summary of benefits and coverage, insurers must answer questions like these: “What is the premium? What is the overall deductible? Is there an out-of-pocket limit on my expenses? Is there an overall annual limit on what the insurer pays? Does this plan use a network of providers? Do I need a referral to see a specialist?”

Insurers must also provide subscribers with a glossary offering standard, government-approved definitions of more than 40 terms commonly used in health insurance coverage, like “deductible” and “co-payment.”

Insurers and employers are subject to civil fines up to $1,000 for each policyholder or employee to whom they fail to send the required disclosure form.

Under the new health care law, insurers and employers are supposed to provide the required information to consumers and employees by March 23, 2012. Insurers and employers said they would probably need more time because the administration was late in issuing the proposed rule.

The rule largely follows recommendations from the National Association of Insurance Commissioners.

Prof. Timothy S. Jost, an expert on health law at Washington and Lee University, said the proposed rule “could have done much more to facilitate comparison shopping.”

But the administration said the rule would still be helpful because “many consumers do not understand how health insurance works” and insurance contracts are often full of jargon.

The public has until Oct. 21 to file comments on the proposed rule.

© 2011 The New York Times Company

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