Shopping for health insurance is hard. Understanding it is even harder.

December 24, 2013

Hundreds of thousands of Americans have spent the days leading up to Christmas trying to navigate the HealthCare.gov Web site -- with varying degrees of success.

But even for those who successfully enrolled for insurance coverage, that's only one big hurdle behind them. The next is understanding how the plan works. And that, new research suggests, will be a big challenge for the uninsured gaining coverage in the coming months and years.

Fewer than one in four uninsured Americans felt confident they understood nine basic insurance terms, like "premium," "coinsurance" and "maximum out-of-pocket" charges. For those who currently have coverage, that number hovered around 49 percent, with just fewer than half of those holding policies right now feeling like they had a good handle on these nine terms.


"Confusion around these concepts would make it difficult for consumers to understand trade-offs between different health insurance plans," the study authors, led by Sharon Long at the Urban Institute, write in the journal Health Affairs. "Low health literacy could reduce the gains for consumers, particularly…if the consumers who do enroll face unexpected out-of-pocket expenses."

Researchers found in this study, which relied on a sample of over 7,000 non-elderly adults both with and without insurance, that many struggled with these nine health insurance terms.

Those with the most difficulty tended to be those who were bilingual or Spanish-speakers, younger people and those with less than a high school education. While these groups had the lowest rates of understanding, that's not to say that other demographics did great: Among those who were college graduates, just over half felt confident in understanding all nine terms.

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This explains why you see efforts from some health insurers to explain the different terms during open enrollment. The Blue Cross Blue Shield Association, for example, has launched an AskBlue Web site that's pretty much aimed at educating consumers about these terms.

But even those who already have coverage don't appear to have the firmest grasp on how the product they purchased actually works.

Separate research from George Loewenstein of Carnegie Mellon University had similar findings. His research shows that among those who hold insurance policies right now, many have difficulty understanding core terms, especially "co-insurance" and "out-of-pocket maximum."

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