The hidden cost of employee confusion about health insurance

This is a great article from Employee Benefit News about how difficult it is for your employees to understand their coverage documents…
 By Shana Sweeney

July 1, 2011

How well do your employees really understand their health plan? Do you know the readability score of the materials you provide them? How much jargon is included in your summary plan descriptions? How do you educate new grads entering the workforce and individuals working in the U.S. for the first time on the intricacies of health insurance? Is it even an employer’s responsibility to improve health literacy?

ERISA says that SPDs should be written in plain English so that the average participant can understand them. But according to a 2004 report by the Institute of Medicine, most employer- provided information about health insurance is too complex. Many employers tend to rely on the SPDs or certificate of coverage that are provided by their insurance carrier. Have you ever read one from cover to cover? They’re often difficult for a benefits professional to understand! Even worse, I’ve periodically gone back to the insurance carrier to request clarification on a specific clause only to find that they are unsure of the meaning.

Health literacy is defined by the U.S. government’s Healthy People initiative as: “The degree to which individuals have the capacity to obtain, process and understand basic health information and services needed to make appropriate health decisions.” Research conducted by the American Medical Association Foundation found that poor health literacy is a stronger predictor of health than any other factor.

Further research showed that an estimated $73 billion is spent each year on medical care due to poor health literacy. And if $73 billion is spent on just care, there is an even high cost associated with lost productivity and absences associated with poor health literacy. In the Institute of Medicine’s report “Health Literacy: A Prescription to End Confusion,” the authors estimate that close to half the population has difficulty understanding and using health information.

This is not that surprising to those of us who answer employee questions on medical coverage. How many times have you explained what a deductible or coinsurance is? How many times have you explained the difference between an HMO and a PPO? Or, even more frequent, how many times have you explained to an unsuspecting employee the difference between the allowed and billed amount for out-of-network care?

The HHS’ National Action Plan to Improve Health Literacy offers some tips for employers to help improve the health literacy of their materials:

1. Involve members of your target audience in the design and testing of communications.

2. Use plain language in the development of all information. The Center for Plain Language ( can help provide you with a plain language checklist while you develop your communications.

3. Include specific steps and action words to make it clear what the person needs to do.

4. Provide training, tools and resources for employees to improve their health information-seeking and decision-making skills, particularly to new grads, who may never have had any exposure to making their own health decisions.

5. According to the IOM, health literacy measures more than an individual’s reading skills: It also includes writing, listening, speaking, arithmetic and conceptual knowledge. Make sure to include information that touches on all of these skills.

6. Use sources of information that already exist, such as the CDC Health Literacy website ( or the Health Education Resource Exchange (, which is a repository of health communications.

The movement toward consumer-directed health plans, which require a high level of health literacy, accompanied by the dual pressures of health care reform and ever-increasing costs, only stress the importance of health literacy.

We are overloaded with information in our daily lives. There are tons of mobile phone applications for health. There are several different personal health record systems. There are tools developed by the insurance carriers.

There is a whole industry of health advocates to help you navigate the health care system. U.S. health care is an incredibly complex system — how much time have your employees lost due to health literacy issues?

Hopefully some of this information can help you develop the business case for why health literacy matters inside your company. There is no place that teaches health literacy, and right now employees simply find out the hard way when they have an issue. We have an obligation as employers to step up and either advocate for health literacy to be taught in schools or else provide our employees with a basic level of health literacy.

Contributing Editor Shana Sweeney — a self-proclaimed geek and political junkie — is a benefits professional at Google. She is an SPHR with degrees in politics and human resources. She has more than a decade of experience working in various industries, including high-tech, utilities, manufacturing and health insurance. She can be reached at