Survey Shows Poor Individual Health Insurance Literacy

With the increase in individual health insurance premiums and out-of-pocket costs, many are experiencing confusion regarding their policies. You might hear (and read) the same terms over and over again, but do you really know what they mean? In order to properly choose health coverage, employees must understand the terminology.

Individual Health Insurance Literacy Survey

PolicyGenius, an online insurance broker, recently commissioned a survey of more than 2,000 American policyholders that used their coverage in the past year. Each participant first indicated whether they understood common insurance terms. Then, they were asked to define each of the terms. Based upon the findings, it would appear that many Americans don’t actually understand their individual health insurance policies.

Eighty-three percent of people said that they understood the term “copay,” but only 52 percent could define it. Similarly, with the term “coinsurance,” 47 percent believed they understood it, while only 22 percent could explain it.

Furthermore, only 4 percent of participants were able to define all terms correctly and only 36 percent of millennials could define any of the terms properly.

Defining Individual Health Insurance Terms

• Premium. The amount paid for an insurance policy. This is typically billed monthly.
• Copay (also called a copayment). The policyholder’s share of the cost of an office visit, prescription drug, or other medical service (such as urgent care or emergency services).
• Deductible. The amount you must pay prior to your insurance company paying for services—although many insurance policies cover a portion of certain services prior to hitting this number (such as office visits and prescriptions).
• Coinsurance. The amount (usually a percentage) you are expected to pay after you’ve met your deductible.
• Out-of-pocket maximum. This is the maximum amount you can expect to pay for medical services in a calendar year (including the deductible, copays, and coinsurance). After you’ve reached this amount, the insurance company will cover 100 percent of the cost. This does not include premiums. You will continue to pay your premium even after the maximum has been met.

What You Can Do to Help Your Employees

This survey indicates that there is a greater need for consumer literacy regarding individual health insurance. As a small business owner, you can help by providing your employees with information so they can better understand their policies—especially if you are offering a Health Reimbursement Arrangement (HRA) like a qualified small employer HRA (QSEHRA), also known as the small business HRA.

If people are not using brokers while shopping for policies through the Affordable Care Act (ACA), they may need someone knowledgeable to answer questions; you might be the person they turn to. 

Conclusion

The recent survey by PolicyGenius shows that consumers do not understand their individual health insurance policies as well as they think they do. You can do your part by educating your employees about common insurance terms and procedures.