More than Half of Americans Have Low Health Insurance Literacy

July 25, 2022 - Many Americans may have low health insurance literacy, as up to 77 percent of people were confused by basic health insurance terms, such as coinsurance, copayment, and deductible, according to a Forbes Advisor survey.

The online survey gathered data from 2,000 Americans with health insurance between June 29 and July 1, 2022.

The majority of respondents (85 percent) reported that they were very or somewhat happy with their health insurance plan. However, many individuals had knowledge gaps regarding critical health plan-related topics, indicating low levels of health insurance literacy.

More than three-quarters of respondents (77 percent) could not correctly define coinsurance.

Three in ten individuals reported not knowing, while the remaining thought it was a flat fee paid every time you receive healthcare services (12 percent), the amount you pay toward medical bills before your health plan starts paying (12 percent), or the difference between your premium and what your health insurance pays (14 percent).

Only 23 percent of Americans identified the correct definition of coinsurance: the percentage your health insurance plan pays versus what you pay.

Younger people and women were less likely to say they didn’t know the definition, while men were more likely to confuse coinsurance with a copayment.

Almost half of Americans (46 percent) did not know what a copayment was, while 54 percent correctly identified it as a flat fee you pay every time you receive covered health services.

One in five respondents guessed that a copayment was the amount you pay toward medical bills before your health plan starts paying. Younger respondents between 18 and 25 years old were less likely to choose the correct definition, while more than half of other age groups answered correctly.

Similarly, 45 percent of individuals could not correctly define a health insurance deductible. Younger respondents were less likely to choose the correct definition compared to other age groups. Men were also more likely to select the wrong definition than women (59 percent versus 45 percent).

Just over half of the respondents (55 percent) correctly identified a deductible as the amount you pay for medical care before a health insurance plan begins paying for care.

The survey also revealed that Americans have misconceptions about health savings accounts (HSAs)

Between 15 and 20 percent of respondents seemingly confused HSAs with flexible spending accounts (FSAs) and said that you can set up an HSA with any health plan, you lose HSA money if you do not use it in a year, and you lose your HSA if you switch jobs.

Around 40 percent correctly identified that HSAs let you set aside money on a pre-tax basis to pay for qualified medical expenses and HSAs can be used to pay deductibles, coinsurance, and copayments.

More than half of Americans (55 percent) knew that children under 26 can stay on their parents’ health insurance plan. However, some respondents thought children under 26 could only be covered as a dependent if they had a chronic illness (4 percent) or only if they still lived at home (24 percent).

Respondents also lacked knowledge about which events qualify someone for a special enrollment period. For example, nearly 30 percent incorrectly said that being unsatisfied with their current health plan or getting diagnosed with a new medical condition would allow someone to change health insurance at any time.

Additionally, over ten percent incorrectly thought enrolling in college, gaining weight, and buying a house would deem someone eligible for a special open enrollment period.

Between 33 and 49 percent of respondents correctly identified switching jobs, having a baby, getting married, losing your job, and getting divorced as events that would trigger a special open enrollment period.

Individuals expressed confusion about medical bills as well. Nearly a third of respondents reported paying a medical bill but being confused about why their health plan did not cover their care. Other respondents who paid a medical bill were confused about the services they were being charged for or whether they were paying for the treatment or a copay.

Researchers have found that improving health literacy could help boost member health outcomes and lower healthcare spending.