A new form required by the health-reform law will help millions of consumers better understand how their insurance works, according to a report from Consumers Union, the publisher of Consumer Reports magazine and this web site.

The law requires all health insurers in 2012 to explain the basic components of their coverage on a standardized form similar to the nutrition-facts label on foods. The form uses a simple format to explain common terms, such as deductibles, co-payments, co-insurance, and out-of-pockets limits. It also requires insurers to calculate and disclose total patient costs for three hypothetical patient scenarios, allowing consumers to better understand the “bottom line” of what they’d end up paying out of their own pocket if illness struck. The three scenarios used in the study were having a baby, treating breast cancer and treating diabetes.

Lynn Quincy, senior health policy analyst for Consumers Union and co-author of the report, says,

The form allows consumers to compare health plans apples-to-apples and thus makes shopping for a plan easier. It also helps people appreciate more deeply the value of their health insurance.

She noted, however, that the forms still need some tweaking. For example, they need shorter and better definitions of key insurance terms commonly misunderstood by consumers. The report also recommends additional medical scenarios that consumers could view online.

Consumers Union tested the form in one-on-one interviews with consumers in St. Louis, Mo. and Buffalo, N.Y. The study was partially funded by the New York State Health Foundation and the Missouri Foundation for Health.

“The success of health reform will depend to a large degree on making insurance options understandable to consumers and helping them to make informed choices,” said James R. Knickman, President and CEO of the New York State Health Foundation. “The new disclosure forms is an important component of meeting that need.”

Read more of our coverage on health insurance and health reform.

Source
Early Consumer Testing of the Coverage Facts Label: A New Way of Comparing Health Insurance [Prescription for Change]