As someone just entering the workforce (many years ago), one of the perks of working were the benefits that were offered. The health plan was a PPO, known as a Preferred Provider Organization. It gave a financial incentive if a member used a Blue Cross doctor. The plan had something called a deductible, which I had no idea what it was. “What is being deducted?” was my first question. “Deductible. Hmmm. What in the world is a deductible?” To this day, I wonder how in the world did someone come up with the term, deductible.
On Wikipedia, it is defined as:
“In an insurance policy, the deductible is the amount paid out of pocket by the policy holder before an insurance provider will pay any expenses. In general usage, the term deductible may be used to describe one of several types of clauses that are used by insurance companies as a threshold for policy payments.”
In the Merriam-Webster dictionary, it is defined as:
“A clause in an insurance policy that relieves the insurer of responsibility for an initial specified loss of the kind insured against.”
Still baffled, I turned to my 20-volume Oxford English Dictionary, known lovingly as the OED and the final authority when it comes to the English language. It boasts over 600,000 words over a 1,000 year time span. Surely this dictionary would provide a clear definition:
“The amount of a loss which must be borne by the policy-holder in the event of claim upon an insurance policy. Chiefly N. Amer.”
Now it’s even more confusing, wouldn’t you agree? Because with an auto insurance plan, I pay a deductible, and then the insurance carrier pays for everything else. But with health insurance, I end up paying something called co-insurance… enter new term that no one ever mentioned in business school. And after paying coinsurance, you pay nothing once reaching the out-of-pocket maximum. Then the health plan pays for everything. But don’t worry, you only have to pay a copay for doctor’s visits. That’s $25 each visit.
Confusion
For the newbie into the workforce or for someone who has come from another country, the health insurance system in the US is very confusing, and that’s probably an understatement. It’s no wonder so many first-generation workers prefer to use a clinic, even though their employers provide expensive health plan coverage.
But confusion about how a deductible works is only the beginning. As health plans have unfolded over the past few decades, so has their complexity. Enter the idea of the High Deductible Health Plan (HDHP) with an HRA or HSA. More terms, more nuances, more complexity. You can use your HRA/HSA money for qualifying medical events (QME’s), but be sure to check with the IRS or your HR department. If your employer also offers an FSA, then your FSA becomes a limited-purpose FSA that can only be used for qualified medical expenses other than for the medical plan.
At this time, maybe someone re-entering the workforce to get benefits is thinking, it was a lot easier before becoming an employee and when I DIDN’T have health insurance…
The last straw
Now that someone finally makes sense of how to use their fancy high deductible health plan, they find out (usually the hard way), that providers charge different amounts for the same service, but you really don’t know how much they charge unless you call the doctor’s office… Even then, they aren’t sure.
You are also sticker shocked that an x-ray could cost in excess of $2,500! You say to yourself, there is no way that this x-ray could cost this much. So you call another doctor, and they tell you it’s $3,750. You’re shocked and angry that this could be so expensive. All of your HSA money is going to get eaten up by just this one claim. Finally, you call one last doctor, and they give you a much better number, $1,400… But if you pay cash, they will only charge you $700… Bewildered, you throw your arms up and go to HR for help. This was a true story with the CFO of a mid-sized company.
It’s time for a change
In an age of innovation and technological disruption, surely there must be a better way to simplify benefit plans. In any other industry, you know exactly what you pay for and you can check on the quality of the provider… except in the health insurance industry. For health insurance, it’s a confusing blotch of terms and conditions that require you to learn a new language, conduct your own research, and hope for the best outcome. I’m waiting for the day that I go to my favorite restaurant and they say that the appetizers are a copay but the main course selection will be subject to a deductible and coinsurance…
Want to simplify your health insurance?
You can finally do something. Our CorePlus solution has answers for you:
- Transparent pricing.
- Co-pays only. No deductibles or co-insurance.
- Affordable.
- Flexible.
- Saves money.
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Alan Wang is the President of UBF and serves as the lead consultant. He has delivered the UBF solution set throughout the world and is highly regarded for his areas of expertise. You can follow him on Twitter @UBFconsulting.
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