Posted Thursday, Dec. 16, 2010
Full report (19-page PDF, includes 1-page executive summary below)
By Colin Gordon
The steady ascent of health care costs, the erosion of job-based health insurance, and the growing ranks of the uninsured and underinsured have conjured up a wide array of products promising health savings or security. These include various “consumer” (nongroup) coverage options, including health savings plans and limited, high-deductible or catastrophic insurance. And they include a profusion of discount medical plans, most of which offer some combination of discounts on ancillary medical services and access to group or “preferred provider” rates on conventional (doctor and hospital) medical services.
The real value of discount cards is unclear — and obscured by the industry’s marketing structure and billing practices. But given a typical annual cost of about $400/year, plan subscription would only begin to pay off after an accumulation of over $2,000 in medical expenses. Much beyond that, especially in the event of catastrophic expenses, discounts would either make little difference or disappear upon failure to pay at time of service. Because they offer little benefit for those with light medical expenses and no security for those with substantial expenses, the likelihood that discount medical plans “pay off” for health consumers is slim.
The future of these plans, in the wake of health reform, is unclear — and will depend largely on the pace and terms of its implementation. What is clear, as of this report, is the legion of problems that accompany this sprawling and unevenly regulated industry. These include:
- Aggressive and deceptive marketing practices which suggest or imply conventional insurance coverage, or exaggerate the savings or discounts offered;
- Sweeping claims of access to “participating providers,” often in the absence of any clear agreement or commitment by listed providers to honor the plan’s discounts or commitments; and
- Elusive benefits — given plan costs and provider participation — for most plan members.
These problems are especially pronounced at the industry’s margins — where discount plans are re-packaged and re-priced by third-party brokers.
Many states have stepped in to regulate the worst of these practices. State laws governing discount medical plan organizations (DMPOs) offer a range of provisions, including:
- varieties of “this is not insurance” disclosure in marketing materials;
- registration of plans with the state insurance commission;
- filing and/or disclosure of agreements with providers, provider networks, and third-party marketers;
- cancellation rights;
- assurance of financial security (bond or statement of net worth);
- annual reporting.
Although 30 states now have DMPO laws on the books, only a few offer the full range of these provisions, and enforcement depends largely on the capacity or aggressiveness of each state’s insurance commission or attorney general.
"Not Your Father's Health Insurance" was funded fully as the first of four reports being produced by the Iowa Policy Project as part of a $335,043 contract with the U.S. Department of Labor Employment and Training Administration for research on employment and training costs of uninsurance and the impact on contingent workers.