Why People Find Health Insurance Confusing

A lot of people find insurance to be confusing. That comes as a surprise to absolutely nobody. Insurance agents are all too familiar with the puzzled looks on their clients’ faces after explaining things in what they initially believed to be simple terms. 

Whether it’s breaking news or not, it is a problem that needs to be solved. We want our clients to understand what options are available to them so they can make smart buying decisions, and once they’ve settled on a plan, they should understand how it works so they can get the most out of their health insurance benefits.

Why are people so confused?

For agents who want to do a better job explaining health insurance in a way that their clients can understand, it’s important first to determine what’s causing all of the confusion. The problem is that the causes vary among different people—and sometimes there are multiple contributing factors. Here are just a few.

While brokers deal with health insurance every day, our clients do not. Most people only get a health insurance refresher once a year, at renewal time. Unless they immediately apply what they learn, they’re likely to forget much of what the agent tells them, even if they initially understood it. 

We use words like deductible, copayment, coinsurance, and out-of-pocket limit as if everyone understands what they mean, often failing to define them when we start discussing our clients’ insurance options. The truth is that many people don’t understand insurance lingo, which is why we frequently hear clients use these terms interchangeably. 

If there’s a way to abbreviate it, we do. The insurance industry uses acronyms for everything from network types (PPO, HMO, EPO, POS) to tax-advantaged accounts (HSA, FSA, HRA) to federal laws (COBRA, ERISA, HIPAA, ACA) to shortened versions of already-confusing terms (OOP). This alphabet soup of acronyms is super confusing to non-insurance people.

As new laws are passed and new regulations are written, the little bit that clients know about health insurance and some of the compliance requirements becomes outdated. Even when the rules don’t change, there is a constant discussion about what needs to change. As proposed rule changes and legal challenges are reported in the media, consumers have trouble keeping up.  

This, perhaps, is the biggest problem of all. A lot of people just don’t understand health insurance. It’s not their cup of tea. Perhaps they have some sort of mental block that keeps them from absorbing the information. Perhaps the trouble is due to low health literacy, a problem that, according to the Center for Health Care Strategies, affects 36 percent of the adult population in the United States. This means they have difficulty understanding information and instructions given to them by insurers, doctors, pharmacists and other health professionals, making it difficult to navigate the health care system.

What can agents do?

While not all of these problems are easily solved, there are certainly some adjustments agents can make to increase our clients’ understanding of health insurance. Here are some ideas:

• Provide information to clients more frequently, not just at annual renewal time. If we truly want clients to understand their benefits—when they’re signing up and over time—then we need to provide ongoing education. It’s important to remind consumers about the different features of their plan, perhaps in “bite-size chunks,” throughout the year.
• Define insurance terms and acronyms as you use them. Brokers can use descriptive terms to help define less-known insurance terms. They can say things like “up-front deductible,” “coinsurance percentage,” and “flat-dollar copayment.” They can also explain acronyms as they use them so clients will understand what they stand for. For example, when discussing tax-advantaged plans, an agent might say, “with this health plan, you can set up a Health Savings Account, or HSA for short, to pay for qualified medical expenses with tax-free dollars.” 
• Provide regular updates on any potential changes. The rules do change frequently, so agents should provide regular updates for clients who are impacted by those changes. It’s also helpful to include a quick overview of any rule changes at renewal time to make sure clients are up to speed. Maintaining an updated FAQ page on the agency website can be a beneficial point of reference for clients.
• Provide step-by-step instructions. For clients who have trouble navigating the healthcare system, whether because of a mental block, low health literacy, or some other reason, brokers can walk them through the various steps in using their health plan and obtaining healthcare. They can also share some helpful tips to make the process work more smoothly and try to prepare clients for any potential bottlenecks they can anticipate. There’s no quick fix

It’s important for agents to know that there’s no instant remedy that will help clients see the light. The fact is that many of us have been in the industry for years. While it’s second nature to us now, our proficiency grew over time. We didn’t learn health insurance overnight, and we shouldn’t expect our clients to either. But, if we’re proactive, provide bits of information on an ongoing basis, and use each client conversation to further their understanding, we can help people become better health care consumers and loyal customers.