Friday, January 02, 2009

“Consumer Choice” and Complexity

One of the conservative mantras in recent years has been “consumer choice.” When Medicare Part D and Medicare Advantage Plans were designed, the availability of a variety of not-strictly-comparable plans was held to be a benefit to “consumers.” The Federal Employees Health Benefits (FEHB) program of health insurance plans available to federal employees and retirees was held up as an example of how “empowering the consumer” made for good insurance coverage – with federal employees having flexibility to change plans annually during enrollment “open season.”

I’ve been federally insured since the early 1980s. I’ve had the commonest federal health coverage since 1993 (Blue Cross Blue Shield Standard has the most enrollees with over half of those insured). However, this year BCBS Standard plan changes made me decide fast that I now needed to change my insurer. Coverage of out-of-network providers had been lowered markedly with a $7500 deductible for out-of-network surgeons. Although I haven’t had surgery in 50 years, I’m well aware you never know what weird malady you might get or what specific skills you might need, so that was a deal-breaker. [Incidentally, later on Congress became aware of this change and was irked – rightly – that OPM had allowed it. The change gave BCBS even more leverage over surgeons’ prices and could cost patients a bundle. Subsequently, for the first time in history, the federal enrollment deadline was extended this year and some BCBS changes were made – no $7500 deductible – but out-of-network coverage is still lower than previously and having evaluated the options, I am not interested any more in BCBS.]

I quickly eliminated a large number of my options. I was only willing to consider a nationwide plan not local insurers or HMOs. But intelligently comparing just the nationwide plans available to me took MANY hours. The insurance brochures follow a somewhat standardized format to aid comparability, but they comprise hundreds of pages. Happily, DC-based Consumers’ Checkbook publishes a first-rate, very helpful booklet each open season on making the selection. Even with that help, understanding my options was tedious, time-consuming, and dizzyingly mind-bending. [Each plan has its widely varying gotchas. Some insurers don’t pay network rates to a non-network provider at an in-network facility even if no one else is available. Others don’t want to pay for assistant surgeons. Some have low ceilings on hospice spending. Plans state catastrophic limits on spending, but sometimes pharmaceutical costs count toward the limit, sometimes not. And on and on . . .]

I narrowed it down to a few plans and have made a reasonable choice that I expect and hope to be pleased with. But, it’s all so complicated I’m still not certain that in the right (wrong) circumstances I might not have missed a gotcha. However, I believe I have chosen pretty well.

This year, comparing plans was a job that I (with an academic background, good health, and time) was willing and able to do. Realistically, most people are not able to evaluate sensibly such complicated options. I suspect most federal enrollees stayed with BCBS Standard this year even though with the changes they’d be better off in other available plans. I’m grateful I had time this year to do the work involved. Last year, I thought I probably should look at changing because of some other plan considerations. But I had a stressful and demanding job situation at that time, so I simply could not – and did not – do so. Most people are neither willing nor able to take the time to thoroughly read hundreds of pages and evaluate detailed options. So, they either rely on inertia (as I did last year) or they choose on something absolutely stupid – like the amount of the co-pay when they have a routine doctor visit.

Medicare Part D and Medicare Advantage plans put a similar burden on people. The old, ailing, or disabled are even less likely to be able to compare disparate, complicated plans. In the fictional ”consumer choice” fantasy world where everyone did take the time to choose intelligently, the aggregate time burden would be enormous. Here in the real world, most people don’t (and often realistically can’t) choose on the basis of considerations most material to them. They discover the adequacy of this year’s plan only if and when it ends up causing them problems – then they change in a subsequent year. Meantime, they may have incurred debt or been unable to meet medical needs. Most people are healthy. When plans are judged by last year’s experience, plans can keep most enrollees despite coverage gaps, because enrollees won’t uncover problems till they get sick (when plans are not sorry to have them switch away).

Although I’m happy to be in FEHB, I don’t think “consumer choice” is what has made FEHB better than much other health insurance. I think what has historically ensured its value is that federal provision of employee health benefits is fairly generous and that the Office of Personnel Management has looked out for federal workers. With OPM keeping a close eye, almost any plan selected has been a pretty decent choice (they fell down in their responsibility this year on the BCBS contract – the lame explanation of an OPM spokesperson can be found here. But FEHB is not, despite numerous claims, an advertisement for “consumer choice.” Consumer choice simply doesn’t have a chance of being a guarantor of quality without controlled, standardized, comparable policies.


Marilyn Mann said...

I'm a federal employee and I've been in the CareFirst plan for years. I totally agree with your post. Neither my spouse nor I was able/willing to take the time to research the available alternatives to Blue Cross (GEHA is the main one I'm aware of) so we just stayed in Blue Cross. Besides looking at the provisions of the plans, we would have had to call each of our health providers to see what plans they participate in! The very idea just boggled our minds, especially since the calls could only have been made during business hours, when both of us are at work, and supposed to be, well, working.
You did not say which plan you chose. I would be interested to know that, and why. If you don't want to respond in the comments for some reason, can you send me an email ( Thanks so much.

Marilyn Mann

Anonymous said...

My wife is an attorney, State employee, and I am a MBA. We cannot even figure out the bills let alone the plans, so we also default to Blue Cross. This whole situation is mind boggling.

Steve Lucas

APeticola said...

My two top contenders were NALC and GEHA HDHP. I ended up choosing GEHA HDHP. I don't favor high-deductible plans as a matter of policy, but since the Bush administration does, the deck has been stacked in their favor to some extent, and I'm not one to cut off my nose to spite my face.

GEHA HDHP seemed to have fewer gotchas than other plans when I read the full brochure, to be relatively inexpensive overall, and to be more generous with out-of-network providers. If you are HSA-eligible, it also has some tax advantages. And it has a relatively low catastrophic limit amount, which would be beneficial if one encountered major health problems.

Your point about the labor involved in calling providers is very valid. To my surprise, I found my doctors' offices did not always know which plans they were providers for -- I had to determine which network the plan contracted with in my state. Then, the providers usually knew, but not always -- one gave me their employer identification number and I had to call the network. And to determine their insurance experience with the plans was again difficult because you had to ask about their experience with that network, not with your plan. Again, really time-consuming and as you point out during work hours. What a joke to imagine most people can or will or should (given life's many obligations) do this!

Ann said...

Amen, once we made a choice, we've just drifted. Reading these forms is less fun than a root canal.

Aaron said...


Is it possible to exchange e-mails? I'd like to discuss some of these health plans if you were willing. I'd be especially interested if you saved any of your comparisons.

1) It seems like NALC (post BCBS change) is extremely similar to BCBS plan.

2.) GEHB's provider network seems extremely limited, which means you'd pay the 25% for everything (although in my experience many doctors waive part of that cost).

3.) Nobody mentioned the $800 anesthesia amount, which I think is BCBS's way to get out of paying anything. My wife went to a preferred doctor, preferred hospital, etc. for her maternity care. But guess who wasn't covered? OF course, that was pre-2009 changes.

4.) Non-emergency room $300 charge seems like a good idea. Except you can't tell if BCBS simply pays the remaining bill. It simply says you pay the first $300. If BCBS pays everything after that, I'm all for it. But more likely, they pay only up to their allowance amount after you pay $300. Still, based on the bills I got, it works out to be about even.

5.)I'm really fed up with the whole health care system. I had severe headaches and did everything I was supposed to. Went to PCP first, then emergency, then hospital. Total bill for less than 48 hours was in the neighborhood of 20K. I'm pretty sure that for that amount I could have had a butler, a private nurse, and a suite at the Four Seasons (not to mention way better food).

6.)Fewer doctors and facilities seem inclined to take any health care plans. They'll wave some of the cost or "discount" their costs, but the billing with the insurance company is a chore. BCBS eventually pays after I dispute everything, but it takes months to clear up.

7.)The benefit plans are extremely confusing because you can't always tell what fits into category 5(a) or 5(b), etc.

8.)Why does it cost more to go to a out of network provider. Being as the insurance only pays 70% of their allowance amount, I'd assume BCBS would be begging us to use non-contract providers.

Mark said...

I know we're 3 years removed from the last post, but I'm curious if the author has been satisfied with GEHA HDHP. It seems to be our best option at this point as a healthy family of 4.

Would the author please comment on his or her experience with the plan?

APeticola said...

Sorry for the delayed response, Mark, but I didn't see this till now. Yes, in general I have been pleased with GEHA HDHP. This was particularly true last year when I had two cataract operations and my 5% (since I had already met my deductible on asthma drug copay costs) was I think a much more minimal cost to me that with most plans (judging from the reaction of the people at the day surgery center who seemed surprised they didn't have to tell me to bring a bigger check along as nowadays it seems those outfits want your money up front).

On the downside:

1) The first year it was very difficult to figure out the rules especially as I had to have an HRA not an HSA for 1/2 the year till I could discontinue an employer FSA. (I'm a working retired fed.) I spent many hours on the phone with GEHA and it was very frustrating. However, after the first year I have things down on how this plan works and I am satisfied.

2) It does get annoying how GEHA socks you with the full cost of drugs that (it admits) it does not pay the full price of. My main asthma drug cost around $430 for 3 months suppply last year and went up to about $490 this year. That is annoying, but you blow through your deductible fast and you have to remember that GEHA does kick in about $700 of the deductible.

3) Plus, paying expenses with before-tax dollars in the HSA is nice. It is particularly nice that I can pay my LTC premium with tax-protected dollars from this where you CANNOT pay that from an FSA.

I can handle the complexity at this time and I like GEHA HDHP. But I still think that this could be a crappy plan if I were less educated, less detail-minded, or simply older and feebler. Boo consumer choice.

GEHA also seems to be good at informing members and has an internet chat with the company president every few months which is highly informative. And the network of doctors and providers has been good.