Health-Insurance Forms Also Need Reform

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Change in the Medicare Rules

What led to insurers looking at jargon in their policies? Terry Clark, chief marketing officer for Ovations, UnitedHealth's company dedicated to the senior market, says an important event was the introduction in 2006 of Medicare Part D, which provided coverage for some drugs but also required many seniors to pay full price for their prescriptions. "There was so much confusion in the marketplace," Clark says. "We wanted to work with the government and local organizations" to help seniors better understand Part D.

"Medicare is extremely confusing," he says. Since 2006, "we've designed a set of standards and a training program across our whole organization." This involved redesigning the explanation of benefits, for example. To make documents more easily understandable for seniors, "we had extensive focus groups and looked at the design elements," Clark says. The revamped materials included things like "less words, more white space, and the use of more icons."

Ingrid Lindberg, Cigna's chief customer experience officer, says the company's program, called Words We Use, was developed in 2008. "We started with things like our enrollment guide, because we know that's what people use to make their decisions," she says. "We simplified the heck out of that. And we changed how our call-center representatives speak."

A Score for Readability

Insurance is currently regulated at the state level, not nationally. The standard that state regulators use to judge insurance policies' readability is a model regulation introduced by the National Association of Insurance Commissioners (NAIC) in 1995. Most states now require that insurance policies conform to the language requirements of the NAIC model regulation, which uses the Flesch Reading Ease test to judge how complicated insurance policies are.

According to the Flesch scale, a policy with a score between 60 and 70 is considered understandable by 13- to 15-year-olds; a score of 30 is considered understandable by university graduates. Insurance forms are supposed to achieve a minimum score of 40.

Sandy Praeger, the Kansas Commissioner of Insurance and former president of the NAIC, says the states "look very carefully at the forms that are submitted to make sure they're readable, and to make sure the language is not confusing." Before an insurance agent can go into the field and sell products, she says, "the forms that they're using have to be approved by us."

The Flesch scale, however, can be a tricky way of judging how readable insurance policies really are. Cogan in Rhode Island says that even if an insurance policy scores a 40 on the Flesch scale, it is not necessarily a policy most Americans can quickly understand.

Just Skimming Through

Despite the recent language reforms, most insurance policies and bills remain difficult to parse. One lingering problem is that Americans don't spend much time reading their policies. Lindberg says average Americans spend just 30 minutes a year choosing their health insurance.

"There's a lot of factors at play here," says Cogan. "As more and more aspects of our lives become complicated, consumers have less and less time to devote to an undertaking like a health-insurance policy." It's not a place, he says, "where they're going to allocate their time."

Cigna's McCormick says health care is complicated stuff, any way you word it. "At a certain point people just tune out. They say: 'I just can't process this.'" She believes that stress is a big factor in how people approach and analyze their plans. "When people are accessing the information, they're not really in their best frame of mind. You tend not to look at something until you really need it."

Galland is an editor at BusinessWeek .

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