A Warning About SCHIP

It was made known today that the State of Hawaii has decided to discontinue its program to provide universal health care benefits to children. Apparently the program became too expensive as parents decided to drop their children from private insurance so they could become eligible for the state program.

Individuals will always act in their own best interest. There are two lessons about individual self-interest we can take from the dissolution of the Hawaiian effort to institute universal health coverage.

Lesson 1: For Hawai'i, this meant that parents would opt to provide health coverage for their kids with a less expensive option than they could get through their employer.

The most recent federal proposal for the expansion of SCHIP would have included children in household that earned as much as $80,000 per year. Many of these households would have been eligible for medical and dental benefits for their children under SCHIP even though they already were covered by private group policies through their employers. The lesson here is that people, especially in troubled financial times, will always seek out products and service that provide better value for the money. SCHIP is far cheaper than employer-based insurance, so we could expect more kids to be enrolled in SCHIP if the eligibility criteria was loosened, in lieu of private, employer-based group insurance.

Lesson 2: Having medical coverage for their children outside of employer group policies makes it easier for parents to change jobs.

Many families are stuck. They have or have had medical conditions that make it impossible for them to be covered for those conditions by an individual health insurance policy. When small employers go to seek out medical coverage for their employees, the policies have to be written based on the medical history of all the employees and potential dependents. Through this underwriting process, if there are significant pre-existing medical conditions, the entire group will be rated with a surcharge, making premiums higher.

If you are a parent with a child with a chronic medical condition, and you are in a job that provides health insurance, the prospect of switching jobs, especially to a small business, includes the risk that your premium will go up, and the possibility that your child will not be covered for the chronic condition. A single payer source eliminates that risk.

Like the advent of 401(k)/403(b) retirement plans, health care insurance needs to become portable so that we have a freer flow of human resources in the marketplace.

You've Reached Your Maximum, Now What?

Delta Dental Plans Association and the American Dental Association are engaged in a fight of sorts. Apparently, a dentist participating in a DDPA network will be limited in their charges to patients for services NOT COVERED by the dental insurance. This is something the DDPA is doing to make sure that their product is consistent across the entire country, and, to the best of my knowledge, is not uncommon among other carriers.

Let's look at this component of a dental insurance benefit and how it affects the average subscriber to dental benefits:

Let's assume that a person with a job pays $35 per month to have dental insurance in the form of a Preferred Provider Organization. That comes to $420 per year in premiums for the insurance. Except for a couple of cleanings per year, a typical DPPO plan will require the patient to pay the first $50 of dental services, and may require a $20 payment per visit. On average, insurance benefits cap out around $1,200 per year.

So you go and get your teeth cleaned one day and you mention that a couple of the teeth in the back of your mouth have been really sensitive to cold and hot lately. Your dentist says you have two teeth that are cracked. (Probably as a result of trying to open that last stubborn walnut in the potpourri plate at your buddy's house, that, in a drunken stupor, you mistook for a bowl of nuts his wife put out for the game watching party.) Anyway, your dentist says you need two crowns. With you insurance that'll be $700 each, and you will be responsible for 20% coinsurance per your policy, or $140 each.

That means the insurance will pay for the crowns. But there is one problem; you've already gotten your teeth cleaned twice, with x-rays, and had a cavity filled, so you have used up about $500 of you annual benefit already, but you already paid your $50 deductible. So you only have $700 left. After a quick calculation in your head, you figure your bill will be about $700 + $140 for the coinsurance . Okay, so your kids will not be able to play baseball this season, (they are young, they'll get over it) and you get the crowns.

As you are walking to the front desk to pay your bill, the old lady with the really bad attitude hands you your bill. The total is $1,140. You were assuming $840 because of what the dentist told you. Once the shock wears off and you get up off the floor, you ask a little too loudly, WTF? Moms in the waiting room cover the ears of their precious little ones, the entire staff snaps around to see who has the lack of social skills to utter such a vulgarity in their presence, and the old lady behind the desk asks, "How do you want to pay for that?"

This is where the DDPA and the ADA are having their fight. DDPA says that even if you go over your benefit limit, you should still receive the discounted benefit where the crown costs $700. The ADA argues that once the patient has reached his benefit the discount no longer applies, and the dentist can charge their standard rate, in this case $1,000.

Most insurance companies will maintain their discounted rate even if you exceed your maximum benefit, there are a few now offering plans that do not extend the discount beyond your maximum benefit. The dentists have experienced this type of plan, and they like it. So now they are pushing the Delta plans to drop the discount one the maximum benefit is met.

If DDPA caves to the dentists, the result would be that dentists (mostly the unethical ones), seeking to perform services where they can charge their full rate, will try to push patients to accept more services whether they are need or not. This will drive up the costs of dental services, ultimately driving up the costs to the consumer. So while "Big Insurance" may be a bad guy in the current financial mess, the insurance companies are the little guy's only defense against the organized profession of dentistry.