Choosing health insurance: New summary provides "apples-to-apples" cost comparison
There’s a new acronym that employee benefits professionals need to learn: SBC stands for Summary of Benefits Coverage. It’s an eight-page document with 15 pages of instructions, and it’s government mandated—with substantial penalties for employers who intentionally fail to create them for each option in a cafeteria-style health option.
The good news is that that’s the extent of the bad news. In fact, the information SBCs contain really should make it easier for employees to directly compare the options for health insurance available to them. And that’s an important step in the overall move toward a more consumer-friendly marketplace under healthcare reform.
What’s in an SBC?
An SBC is a document that presents key, standardized information about a specific health insurance option in a series of tables. For example, if a company offers three options—an HMO, a PPO, and a high-deductible plan—then it would be required to produce an SBC for each one.
The template for each SBC is identical and can’t be modified by the employer. However, the information populating the tables must be specific to each option. For example, the first section of every SBC is a summary of key provisions such as deductibles, copays, and coinsurance. This sample shows information that could apply to a typical PPO plan.
The eight questions in the first column are standard: “What is the overall deductible?” “Is there an out-of-pocket limit on my expenses?” and “Does this plan use a network of providers?” The answers to these questions, and five others, provide a pretty good overview of plan costs and features. By comparing the first pages for each of the options, an employee should begin to see the key differences in coverage. And, in the case of spouses who work for different employers, the SBCs’ consistency should make it easier to evaluate options across different plans.
A second chart provides examples of quite a few “common medical events” (see sample). These include visits to a primary care doctor, diagnostic tests from blood work to MRIs, prescription drugs, surgery, emergency care, and special needs such as rehabilitation or home care. For each “event,” the table shows the dollar cost of copays and the coinsurance percentage, depending on whether a network or non-network provider delivers the service.
Unfortunately, most individuals have no idea how much these services typically cost. You can look at the table and know you’ll be on the hook for 20% of the fees for your X-rays. But how much do the X-rays themselves cost—$50 or $500? And does that include the cost of a radiologist interpreting them? How about surgery? Does that cost thousands, or tens of thousands of dollars? Presumably, the out-of-pocket maximum (from Table 1) for most coverage will be $10,000 or less, so employees don’t have to worry about going bankrupt from medical expenses. That’s the real point of insurance, after all. But when you’re trying to decide between several health insurance options with different monthly premiums, this table simply doesn’t provide enough information to help make an informed decision.
The SBC does fill this information gap for two specific events—having a baby and managing type 2 diabetes—with dollar costs attached to each line item. As you can see below, having a baby involves hospital costs for both the mother and the baby—fees from the obstetrician, the anesthesiologist, and the radiologist, as well as lab tests, prescriptions, and vaccines.
The cost of these services adds up to $7,540, based on average data supplied by the U.S. Department of Health and Human Services. The actual number could be different depending on the area of the country or the costs from a particular hospital or medical practice. Still, it’s a good ballpark number. And a second table shows how the particular insurance plan would cover the event, by adding up the deductible, copays, coinsurance, and limits or exclusions. Thus, the SBC allows employees to compare the bottom-line expense for two relatively costly procedures.
Reading the fine print
In addition to the three tables described above, the SBC presents several sections of qualifications and clarifications that are important in special situations. First is a section identifying services that are and are not covered. Each plan starts with the same list of services that tend to have high variability of coverage –such as acupuncture, bariatric surgery, chiropractic, cosmetic surgery, infertility treatment, and weight loss programs – and then must place each service into either the covered or not covered table.
Second is a section of key patient rights: What happens to someone who loses eligibility for employer-provided coverage. How to file grievances and appeals. It also contains contact telephone numbers for employees who require foreign language assistance.
What employers should expect
As mentioned at the beginning, most employers will have to deal with a learning curve as they prepare their first few SBCs. The formatting requirements are extremely specific. The document has to be in 12-point type, but information must be contained on its specified page without spilling over to the next. Some of the text has to be used as is, and employers may have to interpret the instructions and gather information from various sources that may not be easily accessible the first time through.
In addition, the time frame for completion is critical for employers whose plan year begins on January 1, 2013. Many of these organizations are having open enrollment this fall, so they need to have their first SBCs ready right away. Employers whose plan year is not on a calendar year basis will have a reprieve until their first open enrollment on or after September 23, 2012 (the SBC effective date).
The ruling calls for a penalty of $1,000 per day per enrollee for employers who fail to comply with this new mandate. That could add up to an onerous penalty for large plans.
Finally, it will be interesting to see whether or not participants will make use of the information in the SBCs as intended. There are few areas in people’s financial lives that are as hard for them to understand as the costs of medical care and insurance coverage. It is difficult to predict whether the SBC’s approach to condensing information will succeed in clarifying the subject, or if it might actually make it more confusing. That said, as healthcare reform moves forward in the U.S., participants will be required to take more control and do more decision making about which services they need and how they want to pay for them. In this context, SBCs can only help employees get used to the new environment.
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