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The cost of shopping for health insurance

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Jud Burkett The Spectrum via Associated Press When I wrote a story last week about Congress quietly closing health reform’s Consumer Assistance Program, Wonkblog readers and health-care economists alike quickly seized on one crucial detail: the program’s price tag.

Thirty-five states received a total of $30 million to help consumers find affordable coverage, answer health insurance queries and appeal denied claims. I led the story with Texas, which received a $2.8 million grant and, with it, hired nine employees who have handled about 6,000 phone calls.

Do the math, and the federal government has spent $466 on each call that the Texas Consumer Health Assistance Program has handled.

A number of Wonkblog readers, like Mazzi455, were none too impressed:

I am a believer in the health reform law but this program seems kind of wasteful. $2.8 million for 9 employees to run a hot-line?
I can’t say I feel like there is any great loss here, I can’t imagine enough people would use this hotline to make a difference.

A few days later, Princeton University health-care economist Uwe E. Reinhardt also took a look at Texas’s consumer assistance budget. And, at the New York Times’ Economix blog, he writes that the high price of shopping for health insurance is a natural outgrowth of a health-care system with little uniformity in benefits and price:

Choice among private health insurers in Germany, the Netherlands and Switzerland is straightforward and relatively inexpensive in terms of time and money, because price comparisons are based on a common benefit package. More customized coverage can be purchased, but only in the form of supplements to the common package.
Choice in the United States is expensive, because it requires prospective enrollees to do near-Talmudic studies of the fine print of each insurer’s offerings — many times multiple distinct offerings per insurer.

Does the Texas Consumer Health Assistance Program represent bloated government spending, or is it a natural outgrowth of a complex health-care system? Comparing the public program to how much private health insurance brokers charge provides some clues.

In Texas, the average individual policyholder pays $203 in annual commissions to a health insurance broker, according to Kaiser Family Foundation data. That accounts for 8.6 percent of the average individual market premium in the state. This is high spending on broker premiums, compared with the national average of $145 annually.

The Texas program, at last count, has spent just about $466 for each phone call it’s handled. The hotline stays open until April, and if it handles calls at the same volume it did this past year, that number will drop to $350. That’s still a good deal higher than what private health insurance brokers charge Texas residents but also a number that includes start-up costs such as launching a Web site and hosting outreach events.

What’s difficult to quantify or control for in this comparison, though, are the characteristics of those who turn to a private health insurance broker vs. the population that calls a public health insurance hotline. Texas did not provide a demographic breakdown of clients served for this story, but New York did. Over a third of the patient population it served was uninsured, and about 18 percent were enrolled in Medicaid. Anecdotally, several people working with the consumer assistance programs described receiving calls from populations that had little familiarity with private health coverage, with many looking to enroll for the first time.

There’s also issues of demand: If more Texans were calling the hotline, the cost of each phone call would decrease. Texas looks like a place that should have a lot of demand for a consumer assistance hotline: A quarter of its population is uninsured. For whatever reason, that demand hasn’t come through in Texas — but it has in other states. New York’s consumer assistance program has handled more than 33,000 calls with its $1.7 million grant, working out to just $51.51 per call.

Does the Texas Consumer Health Assistance Program cost more per person than the services of a private health insurance broker? The numbers suggest it does. Does it work with a more vulnerable population that has more complex health insurance needs? My reporting points in that direction. Would the program be more worthwhile spending if more Texans used it? Probably.

Shopping for health insurance, whether with public or private assistance, tends to be an expensive endeavor. And, as Reinhardt points out, that’s probably a natural outgrowth of a less-standardized health-care system, where an apples-to-apples comparison of health benefits and how much they cost is hard to come by.

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