You Can Get Sick But Not Too Sick
In case you haven't heard, most people think any pension problems are a walk in the park compared to a looming health care crisis. Some think the answer is national health care. Others persist - "Let the market do its thing." This blogger tends to be in the second camp but I am pretty sure we'll end up with socialized medicine at some point . Some say we are already there. After all, who REALLY knows the true cost of a particular service or pharmaceutical? There is seldom a supply-demand dynamic at work.
In a recent Wall Street Journal article, journalist Chad Terhune describes the Tennessee response in the form of a mini-medical plan called CoverTN. Made available to businesses that meet certain criteria, it allows employers to offer health care coverage at a cost far below that of catastrophic insurance. The bad news is an annual per capita limit of $25,000. One hospital stay could wipe this out in short order. Nevertheless, even a few corporate biggies are looking at mini-medical as a way to contain costs.
To read more, go to www.wsj.com and search for "Guarded Health: Covering the Uninsured, But Only Up to $25,000 - Tennessee Experiment Goes Against the Grain As States Remake Care", April 18, 2007.
Pension Risk Matters Editor's Note: Hear what guest blogger, Dr. Michael Kraten, CPA, has to say about health care. His recommendation for more transparency in benefits administration is one we soundly support. Founder and President of Enterprise Management Corporation, a management consultancy based in Connecticut, Kraten is doing interesting research in the area of virtual reality negotiations, health savings accounts and non-profit governance. He is also an accounting professor at Suffolk University in Boston, Massachusetts. To learn more, visit his website at www.enterpriseman.net.
Text from Dr. Kraten:
What is the Aflac duck selling?
If you answered “general health insurance” ... surprise! You are not correct. The Aflac web site offers dental, hospital confinement indemnity, hospital confinement sickness indemnity, hospital intensive care, and specified health event policies ... but not general health insurance.
What's the difference? Well, general policies are designed to cover most medically necessary services, with perhaps a few carve-outs and a relatively high lifetime maximum coverage limit tossed in for good measure. Aflac's policies, though, are only designed to cover a few narrowly defined services, and often include a relatively low annual coverage limit as well.
In other words, these are not general insurance policies at all. They're really prepaid service plans, where the plan manager (i.e. Aflac) keeps the premium if the services are not used by the end of the coverage period. And because the services frequently reflect relatively rare catastrophic events, the premium often goes unused ... and are thus typically converted to profits.
This type of plan is certainly not new to the commercial markets. Delta Dental, for instance, has been offering narrowly defined service contracts with low annual reimbursement ceilings for many years. But now many states are considering the implementation of such programs as well. Tennessee, for instance, recently launched a government subsidized small business plan called Cover TN. Its Program Summary states that it simply covers “basic health needs” only, with an annual maximum coverage limit of $25,000 per year ... not nearly enough to cover many complicated hospital stays.
Other states, such as California and Massachusetts, have opted to pursue a different path, proposing universal coverage programs that would cover most medically necessary services. But the costs of such plans are far more significant, and critics complain that their resultant taxation financing mechanisms are both onerous and self-defeating.
Time will tell whether the universal coverage programs will prove to be cost-effective, or whether the prepaid service programs can provide more than “band aid” protection for bleeding state program budgets. The American public might benefit, though, by receiving honest and transparent explanations from their health plan funding organizations regarding what they can expect ... and what they cannot expect ... for their premium dollars.
