Health insurance plans marketed to individuals and their families have long been difficult to compare. Now, however, U.S. News rates thousands of these plans, which cover some 14 million people and will be purchased by even more consumers as health reform legislation takes full effect, making them timely targets for evaluation. Our goal in evaluating these health plans—as it has been for decades in ranking hospitals, colleges, and other vital service—is to help guide important life decisions, in this case to help consumers find health insurance that provides the coverage they need at a price they can afford.
Broadly, the U.S. News methodology examines the two key elements of any health plan: the scope of covered benefits—for prescription drugs, hospitalization, and other care—and how much plan members will pay for them. The most visible component of cost is the monthly premium, which must be paid whether or not care is provided. But there are many other elements, most notably deductibles, copays, and coinsurance.
The data came from information collected from insurers by the Centers for Medicare and Medicaid Services (CMS) and summarized for individual plans on healthcare.gov. In June, the U.S. Department of Health and Human Services made it possible for anyone with technical knowhow to dig through the CMS data.
Our approach has limitations. For example, CMS did not collect—and U.S. News therefore couldn't evaluate—the specifics of each plan's formulary and physician network. Most plans have a formulary, or defined list of medications that are subject to lower costs than nonformulary medications. Also, many plans impose payment penalties on members who go to physicians outside of the plan's network.
Currently available data also are insufficient for figuring out actuarial value—how well a given individual’s or family’s medical needs over the course of a year will be covered by the plan. Finally, we could assess only the healthcare components that were represented in the database. The CMS data records whether a plan covers preventive care, but offers little detail about the specific preventive services offered, making it difficult to evaluate plans on prevention.
Nonetheless, the database did allow us to broadly evaluate a plan’s coverage and cost. We’ve detailed our approach below.
Scope of Coverage
Based on U.S. News analysis, each plan has a U.S. News Rating of one to five stars—or two separate ratings if it is available to both individuals and families. The rating was based on how thoroughly the plan covers a specific list of benefit categories from hospitalizations to prescription drugs to emergency room visits, and how much of the costs consumers have to pay. A one-star rating generally denotes a plan that either doesn’t cover many products and services or covers only a modest fraction of the costs consumers might incur for them. A five-star plan generally covers a broader array of products and services and pays a higher percentage of total costs. In essence, the U.S. News Rating provides a summary of how much a plan protects you from the possibility of high medical bills if you get really sick. A major purpose of insurance, after all, is to safeguard against catastrophic financial losses in the case of the unexpected.
We determined the U.S. News Rating by analyzing 23 benefits of individual plans and 28 of family plans. Each benefit carries a point value, with higher values placed on benefits that do more to protect consumers from potentially ruinous healthcare bills. For example, a hospital stay can cost tens of thousands of dollars, so benefits that cover hospitalizations were given relatively high value. Similarly, prescription drugs can generate significant expenses over time and affect a large proportion of consumers, so drug-coverage benefits were also heavily weighted. Depending on the combination of benefits provided, a plan for individuals could score up to 26 points, and a plan for families could score up to 28.75. For both types of plans, most of the points were awarded based on coverage of essential health benefits, but other factors, such as annual deductible and annual out-of-pocket limit, were also considered. The resulting raw point scores were ultimately converted to star ratings.
Essential health benefits (maximum score 19 points for individual plans, 21.75 points for family plans). U.S. News focused on 10 categories of “essential health benefits” considered high priority by leading institutions such as the Institute of Medicine, a branch of the nonprofit National Academies of Science that conducts health research to address requests from Congress and federal agencies. These 10 benefits will become mandated features for all plans starting in 2014, under a provision of the Affordable Care Act.
Updated October 2, 2012