Finally! A Health Insurance Plan I Understand


Have you ever walked into a doctor's office, hoping for healing but worried about cost? Have you ever left the doctor's office, having paid your co-pay, signed forms confirming that you acknowledge your debt and will pay anything not covered by insurance ... and still had no clue what you'd end up paying?

Of course you have. In fact, a better question would probably be: "Do you ever know exactly what you'll be paying for medical treatment?"

Well, today there's good news on that issue. You don't have to buy totally blind anymore. They do have to tell you what it'll cost -- sort of. And you have the government to thank for it.

Last month, the departments of Health and Human Services, Labor, and the Treasury teamed up to issue draft regulations under the Affordable Care Act (aka Obamacare), requiring insurance companies to make choosing a plan simpler.

Specifically, the new rules require insurers to publish forms providing "clear, consistent and comparable information" about the health-care plans they offer. According to the government, the forms will work much like the tables of "nutrition facts" you find on the side panel of a box of Cheerios. Termed "summary of benefits and coverage," these forms must be standardized to enable apples-to-apples comparisons of what benefits you can expect to get from one plan as opposed to another.

What's Inside the Box?

What can you expect to see, once the new forms begin coming out next year? A whole plethora of useful information, actually. Hitting the highlights, each form must tell you right up top:

* The monthly premium on the plan.
* The overall deductible; that is, the amount you're required to pay in a year before benefits kick in.
* Loopholes, such as any special deductibles that apply to specific services and any services that are not covered at all by the plan.
* How big your bill could be, spelling out any limits on your out-of-pocket expenses.

And that's just for starters. The forms must also inform you if the plan imposes any limit on how much the insurer will pay for your medical care in a given year, or over the course of your lifetime; whether you will be restricted to using a specific network of providers; and whether you can see a specialist without first visiting your family doctor for a referral.

Forms must also explain, in plain English, what you might expect to pay if you need to, for example:

* Get a checkup from your family doctor.
* Visit a specialist.
* Visit the emergency room.
* Get an X-ray or MRI.
* Purchase generic or brand-name drugs.

Venturing further into the weeds, and further improving the forms' apples-to-apples usefulness, each form must outline three specific common medical procedures: having a baby, getting treatment for breast cancer, and managing diabetes. The forms will show examples of what the total cost might be for office visits, tests, hospital charges, and so on.

Importantly, the forms must also include any limits on coverage, as well as what you would be expected to pay for deductibles, co-pays, and co-insurance (the percentage cost of the procedure that the insurance company puts on you, instead of paying itself).

And Speaking of Limits...

So far, so good. But very few things are perfect in this world of ours, and there are a couple of imperfections in even this improved system that you should be aware of as a consumer.

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First and foremost, the forms we are talking about will make it easier for you to choose an insurer and buy the best plan to fit your family's budget and medical needs. That's a big first step towards making medical costs more transparent and helping families plan for the future. However, the new rules do not address the other half of the cost equation: what doctors and hospitals charge for procedures.

Visit a new doctor, dentist, or optometrist, and you're still likely to be surprised by the cost of your initial consultation. If the doctor has to write you a prescription, you're still not going to know ahead of time if the drug in question will cost you $10 or $100. And if your condition requires referral to a specialist, get ready: the not-knowing process starts all over again.

Also important to understand is that there's still room for fudging in the insurers' disclosure forms. Throughout the example posted on the website, you'll see notes warning that "this is not a cost estimator," that this or that information are all just "examples," and that many different factors affect what a given service will cost.

The estimates given in the forms are designed to make it easier to compare costs among plans, but not to tell you how much any given procedure will actually cost.

This fudgability factor may give insurers wiggle room to lowball estimates in order to get you to choose their plan. As the forms warn, "your own costs will be different depending on the care you receive, the prices your providers charge, and the reimbursement your health plan allows." That's one disclosure I think you can take at 100% face value.

Motley Fool contributor Rich Smith does not own shares of any health insurance companies.