Frank Lalli, the long-time editor of Money, undoubtedly edited a health insurance piece or two during his career. But as he wrote in his op-ed piece in Sunday’s New York Times, “I’ve never faced a more confounding reporting challenge than the one I’m engaged in now: What will I pay next year for the pill that controls my blood cancer?” Yes, Frank, there’s nothing easy or straightforward about health insurance and probably never will be, but your detective story deserves a CJR laurel for showing what reporters and the public are up against as health insurance becomes oh so prominent in the brave new world of Obamacare.
Lalli was lucky for a long time. His former employer Time Warner covered him for years under a supplementary Medicare program for retirees that included a special benefit that capped his out-of-pocket prescription costs at $1,000 a year. Not a bad deal, but those goodies are as dead as buggy whips, and Lalli loses his on January 1. He had a simple problem to solve. What would his very expensive anti-cancer drug Revlimid—$524 for one pill—cost him for the next year?
So being a good shopper/consumer of health care as the marketplace gods decree we’re supposed to be, Lalli tried to find out and described his “surreal experience.” It’s an experience that mere mortals who get sick face every day trying to choose coverage, figure out what exactly it will pay for, and then fight the carriers when the bills arrive. Time Warner’s information packet revealed the company’s new retiree plan had “no out-of-pocket limit” on his expenses, while Erin, a company benefits rep explained the new plan would have “no practical effect” on Lalli, and there would be no limits on out-of-pocket expenses. A representative at Time Warner’s new drug insurance provider told Lalli his cost could be $6,900. He called Erin again, and this time she mentioned something about $10,000, but she would get an estimate in a couple of days.
This game of health insurance ping-pong went on for days, with Lalli making 70 phone calls. He got various cost estimates—$9000 a year, $17,000 a year, $60 a month, and $20 to $30 a month if his income were low enough to qualify for a premium assistant grant from Revlimid’s manufacturer. You get the picture. In the end he decided to stay with Time Warner’s plan, hoping the people who told him he would pay only $60 a month, or $720 a year turn out to be right. He won’t know that until he files his first claim.
Lalli’s experience and that of millions of others is at odds with the advice given by federal agencies and from well-meaning groups that have drunk the marketplace Kool-Aid. If you just study up, check your options—and there are loads of them for Medicare seniors, too many in fact—and ask questions, somehow you will “choose the plan that’s right for you.” That’s how the marketing brochures sell the theory. Lalli did all those things. “If a seasoned personal-finance journalist can’t get a straight answer to a simple question,” he wrote, “what chance do most people have of picking the right health insurance option?” The answer: not much.
Too many times reporters end up writing these “if only consumers do that” stories that these groups want us to write. This fall a blog post published on the website of the health policy journal Health Affairs headlined “Turning Consumers into Shoppers: Using High-Deductible Plans Wisely” tried to make the case for the “if only consumers do that” story. The author argued we need to understand benefit design, price, options. Well, yes, we do, but good luck from the Department of Understanding.
In research by Consumers Union released last January, the organization found through consumer testing that people struggle to understand their insurance policies. “These difficulties are so profound that the vast majority of consumers are essentially being asked to buy a very expensive product—critical to their health—while blindfolded,” said CU’s report. CU argued that if policy makers start with an incomplete or erroneous understanding of how consumers shop for health insurance, they won’t design appropriate rules and regulations to help them out.
Let’s resist temptation to do the “if only consumers do that” story and instead sit down with real people like Frank Lalli and learn how they make choices and what barriers they encounter. That’s the story. It offers interesting narrative while making the larger point that it’s damn hard to be the perfect shopper when it comes to health insurance.