Health Insurance Literacy as a Determinant of Population Health

Background

Although the private health insurance industry has been in existence since the 1920s, public understanding of basic health insurance concepts remains sketchy. The correct and confident application of health insurance concepts in making informed decisions about health care utilization continues to be ambiguous for consumers and their families. In 2013, it was reported that more than half of US adults could not accurately identify one of 3 terms commonly used in health care: premiums, co-pays, and deductibles. ^1,2

Over the past decade, health insurance has attracted a lot of attention through major policies such as the Affordable Care Act (ACA) and, most recently, the American Health Care Act. With these health care reform initiatives come new responsibilities for consumers to make informed decisions on plan selection and health care utilization. Such decisions can only be made with a certain level of familiarity with health insurance terminology and processes. For this reason, health insurance literacy is a critical lever in ensuring efficiencies in health care utilization and outcomes.

Health Literacy vs. Health Insurance Literacy

Several studies have documented health literacy, a concept that reflects “the degree to which individuals have the capacity to obtain, process, and understand basic health information and services needed to make appropriate health decisions.” ³ Health insurance literacy, a less studied theme, focuses on “the degree to which individuals have the knowledge, ability, and confidence to find and evaluate information about health plans, select the best plan for their own (or their family's) financial and health circumstances, and use the plan once enrolled.” ⁴

Although both concepts are connected, health insurance literacy provides a broader perspective to an often overlooked and salient barrier to promoting population health. Little or no experience on how to use an insurance card in one's wallet or a subpar grasp of the cost-sharing requirements can lead to care in more expensive settings, or deteriorating health among consumers. ⁵ This undermines health care reform efforts and impedes progress toward attaining the Triple Aim.

This commentary reviews 4 health insurance literacy constructs to determine how proficient consumers are in finding, selecting, and making appropriate decisions toward a positive health care experience.

Health Insurance Literacy Constructs

The validated Health Insurance Literacy Measure (HILM) includes questions related to comparing, choosing, managing, and using health insurance benefits. Described by Paez et al (2014), the tool uses four themes—health insurance knowledge, information seeking, document literacy and cognitive skills—in building the health insurance literacy framework. ⁶ For the purposes of this study, we designed an online survey that refocused the HILM questions to assess respondents' ability to compare, choose, manage, and use health insurance benefits. The survey consisted of 2 sections. The first section collected respondents' demographic information while the second section included questions related to comparing, choosing, managing, and using health insurance.

Comparing examines the respondent's ability to determine benefit differences between policies, deductible requirements, and covered providers. Choosing health insurance analyzes an individual's ability to decide payment options for coverage, estimate costs, ask personalized questions about plan features, and obtain plan information. Managing health insurance encompasses an individual's ability to handle coverage claims rejections, predict their out-of-pocket costs, and know how to investigate coverage benefits before receiving health care service. ⁶ Using measures respondents' confidence in optimally applying health insurance benefits when utilizing health care services.

Key Takeaways

Overall, approximately 60 percent of survey respondents reported limited or below average health insurance literacy, with the lowest competency in the ability to manage benefits. A key finding was that, compared to publicly insured individuals, uninsured respondents and privately insured individuals were significantly less able to choose and manage plans. The limited competency in choosing health insurance has important ramifications for health care reform—although a lot of attention is being placed on cost barriers, selection knowledge plays a key role in health insurance enrollment decision making. To use a college enrollment analogy, high school students will not apply/enroll in college if they lack an understanding of how to enroll, what college options are available, what the differences are, and how each option aligns with their individual career goals—even if financial assistance to enroll exists. In a recent study, young adults acknowledged that they were unaware how the ACA would affect them and voiced particular confusion regarding the purpose of health insurance, how to receive health insurance coverage, and premiums and other types of cost-sharing. ⁷ Although the current system addresses some of the plan selection challenges through “navigators” and in-person counselors on the health insurance exchanges, these resources are unknown to many.

The limited competency in managing health insurance benefits is in line with other studies that suggest that low health insurance literacy levels lead to suboptimal utilization. ² After enrolling in a health plan, consumers are left to grapple with post-plan selection tasks that directly impact their health care utilization patterns. ^8,9 Low managing literacy would result in poor choices such as delayed care, difficulty finding a provider, and not having a usual source of care. ¹⁰ These shortcomings culminate in suboptimal and inefficient health care use and stall health care reform efforts to bend the health care cost curve.

We also found that although females had higher competency in comparing and using health insurance benefits, their ability to choose was lower than males. The higher competency aligns with numerous studies reporting higher utilization among women. ^{11 –14} Increased usage of health care services provides health insurance educational experiences through greater exposure and communications with providers and payers. The lower choosing competency can be attributed to the lower proportion of women serving as primary policyholders. A study by the Kaiser Family Foundation notes that women are less likely than men to be insured through their own job and more likely to be covered as a dependent. ¹⁵ Being covered as a dependent could mean limited opportunities to select and administer insurance policies.

Solution: Back to the Basics

To address the health insurance literacy gaps, we propose 3 actionable solutions. First, a curriculum should be added to high school and college-level education to introduce youth and young adults to practical health insurance. As young adults age out of parental insurance coverage, parents and guardians should be encouraged to play a larger role in guiding young adults to enroll in their first health insurance plan. This is particularly important because their current health state and/or the financial strength of their family may give young adults a false sense of security to not purchase their own, or leave them unexposed to levels of lower insurance coverage. A third option is for health insurance companies to establish an “onboarding” process that reviews insurance plan features with new consumers when they enroll in a new plan. Similar to how a pharmacist reads through prescription drug information before administering medication, this insurance onboarding can educate consumers about best utilization practices and the risks of certain types of plans. The purported onboarding process could take the form of a short online video, or prerecorded infographics via mobile apps.

Conclusion

In our current public-private health care delivery system, health insurance literacy cannot be overemphasized if we are serious about curtailing health care costs and improving population health.