Yes, We Really Do Need One, Single Definition of a Out-of-Pocket Limit

Illustration by Dreamstime
Illustration by Dreamstime

Here’s the conversation that I really hate:

“So, you work with benefits?”

“Yes, health care and retirement benefits primarily.”

“So, you can explain to me what an out-of-pocket maximum is?”

(This totally happens, am I right?)

A chance to make a difference

“Well, it depends, unfortunately. Typically, it means the most you’ll ever pay in a given year. All your deductibles and co-payments — for doctors, drugs, tests. It helps you figure out what kind of emergency stash you need — in case you ever get really sick. Except it doesn’t always mean that.”

I hate this conversation. I feel like a fool. How long have I been in this field, and I can’t actually define a simple term to an interested (gasp!) health care consumer? Folks, we’re doing something wrong.

But I have good news. Now — literally right now — is our chance to make a difference.

All the fine print of the proposed regulations for the soon-to-be required medical summary —dressed up into a lovely new term: Summary of Benefits and Coverage (SBC) — is available for review and comment. And comment we must.

I know I’m not the only person who was hopeful at the idea of this standardized shopping guide for all Americans that was part of health care reform. I admit, I’ve been waiting excitedly for the regs to be issued.

An apples-to-apples comparison?

Who doesn’t love an apples-to-apples comparison? They’re particularly hard in our profession. (If you don’t remember why, start at the beginning of this article.) When I read the actual law, I read that we were going to get standardized definitions, because that’s really the only way an apples-to-apples comparison can work.

Did you read the regulations? Okay, I know you didn’t because it’s annual enrollment time. And dependent audit time. And … and … and … .

Here’s the skinny:

  1. Terms are not really standardized. Check out the new proposed definition of out-of-pocket limit.
  2. The SBC, if approved without public comment (frustration? disgust? fury?), will be just one more legal notice that costs us all money and will be one more piece of evidence to average Americans that we’re not serious about health care consumerism. [Here’s yet another study showing how confused individuals are when buying health insurance.]
  3. You can comment, quickly and easily, via email to the Department of Labor.

We need a simple, standardized term

When I was just out of college, like a lot of young people, my heart softened at every earnest face requesting my signature. I have no idea how many random, probably irrelevant, petitions I’ve signed. But this is different. You get it. And you know it is true.

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Health and Human Services and the Department of Labor need to fight for one simple standardized term — out-of-pocket limits — so Americans can shop for insurance and say, “Yes, I can stomach $10,000 if I really have to — for this premium.” Because, when it comes down to it, all the explanations of deductibles, co-pays, and coinsurance are a lot of fun for actuaries. But the real math can be simpler — this is the most I’ll pay in any given year for my health care, and I’m willing to pay $$$ in monthly premiums for this kind of financial protection.

Bankruptcies happen because people don’t understand this concept. The American Journal of Medicine reported in August that 60 percent of personal bankruptcies in this country are due to medical bills. I’d guess a good portion of individuals just didn’t understand the math. They were focused on the deductible.

If we could get the industry to standardize what out-of-pocket limit means, we could get real people to do that math and really shop for insurance. They might even appreciate that they have insurance again, and stop grumbling because they’re exhausted by all the confusing paper and bills that are bigger than they expected.

Here’s how you can help

Send a one-line email to the DOL. Here’s all it needs to say:

Standardize the definition of the out-of-pocket limit so that all Americans can see their true financial exposure when they shop for a health plan.

Please do this before October 21.

(See how earnest I look?) Imagine how proud you could be next time your neighbor asks you to explain his enrollment packet.

Do it now. Thank you!