Explanation of Benefits

What Explanation? What Benefits?

By Ian Morrison

Every health insurance companies send out these great little missives called Explanation of Benefits  (EOBs).  They are hilarious, they are the mother of all oxymorons, because they don’t explain anything, and beneath all the obfuscation, you find out there are no benefits.  While some enlightened insurers like Humana and Aetna have started to put them on the web (so you can be confused on-line as opposed to by snail mail) most of the health plan communication to its members centers on these great little letters you get in the mail.   The EOBs come on flimsy paper and look suspiciously like a bill from one of those phony publishing companies.  Then you open it and in big bold writing it says: “THIS IS NOT A BILL” so why are you sending it?  Then you read on, this is not a bill, it’s a pre-bill, you are going to get a bill, this is just not it, quite yet.  But it does help to get a little story in spreadsheet form as to why your health insurance is not covering your health care services.  Oh by the way, you get this a long time after you have had the service they are talking about in the EOB.  Beautiful.

My family gets lots of these letters and because we are dealing with several insurers we get to sample the quality of communication of health plans and their members.  The EOB is just part of the way health insurers communicate with their members. Utilization management sends out great little form letters too.  My wife got one last week that said the diagnostic service she had on June 17 was deemed medically necessary, but it went on, (in bold) THIS CERTIFICATION IS BASED ON THE INFORMATION PROVIDED, AND IS OF MEDICAL NECESSITY ONLY AND IS NOT A GUARANTEE THAT HEALTH BENEFITS WILL BE PAID.  The letter was sent on June 18th.

Another exchange between my wife and the customer service department of a major national insurer, yielded the following insanity.  My wife wanted to move her regular source of care from one group practice to another in our local area.  She asked two very simple questions of the health plan: “ who is available and what would be the cost?”  After going through several layers of supervisors, she was told: “We can’t tell you that, it’s a secret”.   Basically, to give away cost to an enrollee in a high-deductible plan is to give away discounts and negotiated rates.  It’s a secret.  I told this story to a group of benefit managers of the largest employers, and one benefit manager jokingly agreed in frustration:  “They told us it was a secret too.”

The point is this.  We are now a decade in to the so-called consumer market, yet health insurers are still wedded to convoluted, bureaucratic communication that obfuscates their responsibilities and simply leaves the consumer with the financial Gotcha (after the care is long since consumed and forgotten), when the provider finally tracks the patient down for the “amount you owe” known affectionately as patient responsibility. The absolute worst Gotcha is recision of benefits, where the health insurers wriggle of out any financial responsibility on legal technicalities when patients have racked up big bills for lengthy illnesses.  They may have a legal case but do they have a moral case?

There are two major implications of the EOB morass.  First is that health insurers and providers alike have a long way to go in creating true transparency on cost and quality.  To have truly informed consumer decision-making requires that providers and insurers coordinate their communication to clearly tell the patient what it will cost patients at the time the patient has to make the decision to have the service or not.  The health care system fails miserably on this simplest of all market tests:  you know the price before you buy.

New models like Carol (a web-based market maker who enlists providers and plans in a consumer-friendly comparison shopping environment) hold some promise, but their penetration is infinitesimal, and there is really no reason for providers and plans to want to make it easier for consumers, when the Gotcha model is so spectacularly effective in obfuscating how much things really cost.

The second big implication is at the policy level.  Health insurers have had a great run financially over the last five years.  They remain incredibly unpopular with the American public in national surveys of trust in health care.  They have shown a willingness to make important concessions in the policy-making process with regard to expansion of coverage for all Americans at both the state and national level.  This is not the “Harry and Louise” crowd of the 1990s health reform debate.  Nevertheless, health insurers run the real risk of being targets of punitive regulation in a strongly Democratic  new congress.  If national health reform stumbles next year under the weight of a weak economy and political infighting over who pays for coverage expansion, don’t rule out health insurance reform.  Insurers may get guaranteed issuance, rate setting, medical-loss requirements, prohibitions on recision, marketing constraints, Medicare Advantage cuts, and a whole host of state regulation (where the real powers to regulate currently lie).  Part of the reason they may be in the crosshairs is that they are not seen by providers or patients as adding much value.  We don’t want single payer government run health care, but we don’t like the private sector pluralism much either.  Health insurers may be asked to explain their own benefit to society, and they better have a good answer.