Why is Health Insurance So Complicated?

I get this question from many exasperated clients that are just looking to get their family covered in the event of a serious illness or injury. They have spoken to several agents and looked at many different types of plans and after a while they all tend to blur together. 

It is a valid question, “Why is Health Insurance So Confusing?” Honestly, there is no single answer that would satisfy that question. I can say this, health insurance is confusing because health care is complex. No two people have the same needs so the insurance companies are trying to meet the various demands by consumers for health coverage. Thus the multitude of options.

When I was growing up the choices were far fewer and most people got insurance through their employer. So it was rare that anyone needed to get their own insurance. You would have an HR person at work that operated like a liaison with the insurance company. They would help you choose a plan based on what the insurance company was offering and you could go to them as well if you had questions or problems with the insurance.

Nowadays fewer and fewer employers are offering health insurance as a benefit due to the costs. This is forcing many families and individuals to find private insurance. And because they have very little understanding of the industry and terminology it can become very confusing.

When my clients are looking for health insurance in Nashville, this is what I tell them. This is not like buying any other consumer product; cars, TVs, vacations, lawnmowers. Health insurance is, by its nature, a complex contract for services. If you are not familiar with the terminology and each part of a health insurance plan, it is easy to get lost. Just like anything. If you are looking for a TV and the sales person is talking about 4K, UHD, LCD, refresh rate, 1080p, 1080i you are going to fall asleep while they are trying to sell you something as simple as a TV.

Like I said, health insurance policies are by nature complex, they have to dot a lot of I’s and cross a lot of T’s to meet each state’s standards. So translating that to the consumer for an insurance agent can be difficult. In fact, when I have worked with health insurance agents that don’t work in the private side of things, even they get a little lost. So don’t feel bad.

Each state’s department of insurance has to approve of any plan offered within its borders. There is a lot of legal jargon involved in order to protect consumers. The insurance agent has to translate all of that into layman’s terms for the consumers so they understand what they are and are not getting. If there were only one or two plans to look at it would be much easier, but that is not the case. There are hundreds of insurance companies and each of them have more than one plan to offer and each of those plans have variations that you can customize like premiums, deductibles and networks.

You as the consumer have to look at your needs in deciding which plan to buy. You can’t say “I just want good coverage.” Because “good” is relative. If you are 23 years old, just out of school you, are not making a ton of money yet, but you know it is wise to have health coverage. You are not worried about cancer, heart attack, stroke or any of those things us old folks are worried about. You are more concerned about the broken leg from water skiing or being injured in a car accident or possibly a few days in the hospital from pneumonia.  

You could get a plan that is very affordable and offered you a strong accident policy while not leaving out hospitalization as an option. You don’t need unlimited benefits at 23 years old. You would be over insured in my opinion. Unless you could afford that kind of coverage, I would not suggest it. It’s overkill. 

But, if you are in your 50’s and have been working and saving and investing for over 25 years, you have something to lose in the event of a huge hospital bill. You could lose your kids college funds, your paid off house, your retirement accounts and that second home you just bought on the lake. In that case you would want unlimited or “comprehensive” benefits. That means you would have a limit to how much you would be liable to pay each year towards your medical bills.

If you have a $1 million cancer treatment bill, you would have no more out of pocket cost than $7-10k. And that is it. That is called an annual out of pocket max. Each year you would have to spend no more than that max and the rest is covered by the insurance company. These plans can be costly if purchased on your own. But, they are a worthwhile investment if you are looking to protect your assets. Again, not something most 23 years olds are that concerned with.

So you can reduce the confusion by deciding what your needs are before you start shopping. Just like shopping for a TV. Do you really need a 96” 3D touchscreen wrap-around TV for $12,000 or would a nice high definition TV that fit in your living room for the family to watch movies on work just fine? See?

If you are unsure of what your needs are find a local agent that you can talk to about your needs. They can tell you the best kind of plan to look for and probably get you some rates very quickly so you know what to expect. Needs and budget are the 2 factors to consider. Get what you need and get as much of it as you can. There can be a tremendous difference in benefits for a few dollars more per month.

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