As regular readers of my blog posts and articles know, I often hold health insurance Explanation of Benefits (EOBs) up as a prime example of customer communications gone wrong.
Consumers get these written statements from their health insurance companies after going to the doctor or getting medical tests. EOBs are supposed to outline what medical services you received as well as how much of the provider’s fee your insurance company is paying and why. Since you’re ultimately responsible for the portion of the bill not paid by the insurance company, the EOB and its explanations are pretty important.
Problem is, most people need an explanation for their Explanation of Benefits. Many EOBs deserve a place in the pantheon of the most unintelligible customer communications. In a 2009 study, consumers surveyed by branding firm Siegel + Gale said healthcare EOBs were one of the most difficult documents to understand, second only to mortgage applications. (Yes – even tax forms fared better.)
To call EOBs “Explanations of Benefits” is an insult to explanations everywhere. “Engima of Benefits” seems more fitting.
To make matters worse, EOBs often constitute the most common, regular interaction that a consumer has with a health insurance company. When the EOB is confusing or ambiguous, it can’t help but color the customer’s perception of the healthcare firm. Is it really any surprise, then, that the health insurance industry occupied last place in Forrester Research’s most recent Customer Experience rankings? (Yes – cable TV companies, investment firms and even airlines scored better.)
But hold on; it gets better. Because if there’s one thing I can think of that’s worse than a confusing, ambiguous EOB – it’s a confusing, ambiguous, misleading EOB.
With much fanfare, a Fortune 500 health insurer recently rolled out a “new and improved” EOB. Now, they deserve kudos for even investing in this document that so many other companies completely ignore. And their new EOB – while not yet a delight to interpret – is an improvement over the earlier version.
But where this firm went wrong with its redesign was in its effort to highlight the financial benefits of its customers’ health insurance coverage.
Taking a page out of the playbook of retail stores, the centerpiece of this new EOB’s summary page is a section indicating how much “you saved” by having this provider’s health insurance. I’ve clipped a sample of the relevant statement portion above.
While it may be tough to follow the insurer’s math, they’re essentially defining your ”savings” as the portion of the doctor’s bill that you don’t have to pay. But is that a fair calculation?
Many receipts you get from grocery, electronics and other types of stores have an “amount you saved” displayed at the bottom line, underscoring the impact of discounts, coupons and loyalty programs. This savings reminder is even more common these days, as consumers became more price sensitive and value conscious during the Great Recession.
This calculation works in retail because the transaction is simple: the product has a sales price and a discount price. You pay the discount price, and the portion above and beyond that is what you’ve saved.
For health insurance, it’s more complicated. That’s because you don’t get health insurance for free. There is an up-front cost in the form of a monthly premium that you either pay directly or have automatically deducted from your paycheck. When considering how much a consumer “saves” by virtue of holding health insurance, you’ve got to take this baseline cost of coverage into account.
In the example above, if your monthly insurance premium is $300.00 and this was your only claim that month, you didn’t really save 51%. Your doctor billed $782.91, you paid $300.00 to get coverage, and you paid another $298.22 for this particular claim. So your savings that month was really 13%, compared to if you didn’t have any insurance at all ( [782.91 – 85.14 – 298.22 – 300.00] / 782.91 = 13%). Sounds a lot less impressive than 51%, eh?
Which is why this “savings” calculation has me bent out of shape. Perhaps it wasn’t this insurer’s intent to mislead consumers, but that is effectively what’s happening. It’s a great concept to incorporate a measure of financial value in an EOB. But any net customer savings that are calculated without regard to monthly insurance premiums are, at best, wrong and, at worst, deceiving. Welcome to the EOB as “Exaggeration of Benefits.”
If this is what innovation means in healthcare customer communications, then I suspect health insurance plans will continue to make airlines and cable TV companies look like the best, most customer-focused service providers on Earth.