Separating Wellness from Catastrophic Health Care.

What do most people think of when they describe their ”Health Insurance”?  To the majority of Americans that still have employer paid health insurance premiums, it means never having to see a bill for almost everything.  100% coverage for office visits, small co-pays on prescriptions, scheduled tests for early detection, and even nutrition and exercise programs for the purpose of preventing disease. 

All these things are wonderful but were never intended to come under the coverage of Health Insurance.  These are what I call ” health related benefits” that became part of all HMO’s (Health Maintenance Organization’s) coverage for the purpose of holding down overall life time costs of the patients in their groups.  It was a worthy concept that became the norm for what most people expect with their health insurance coverage today.  The problem is that this kind of cradle to grave maintenance expense was never intended to be part of insurance.  Insurance uses “actuarial tables” to determine the cost for insurance using age, health conditions and risk factors to determine premium amounts for all of their policy holders.  The problem today is that health insurance companies have become administrators of health benefits, not insurers for the purpose of risk against large claims for catastrophic health events.  The word “Insurance” has nothing to do with what is going on today with the ever increasing cost of health care. 

You can use auto insurance as an example for what I mean when separating daily maintenance from catastrophic events.  With auto insurance, the owner will decide what deductible they want or in other words, how much out of pocket expenses they can aford for things like day to day maintenance, scratches and dents etc. The more risk the auto owner is willing to take the less his insurance premium will be. 

Since most Americans feel that “Health Care is a right in this country and we have the debate going on now for how to cover everyone, I think separating “Wellness” from “Health Insurance” someway may be the key to affordibility. I think two things would have to happen for a plan based on the separation of these to entities:

1.  For the Catastrophic side, Health Insurance Companies would be required to provide a catastrophic plan that was pro-rated to the lowest cost that can cover everyone, including all the people with pre-existing condiditions. This pro-rated amount would be the same whether it was paid by the employer of as a benefit from the govenment.  The deductible amount would propably need to be at least $3000 a year to make it affordable.  Since the Insurance Companys are for profit businesses, a reasonalble profit margin would have to be figured into the premium.  Since this would be a nationally run program, all insurance companies now in the business would be required to offer it.  This product would have to be part of any company that now sells health and life products.  Some consolidation of insurance may happen if this were to take place, but this program should be designed to not be such a burden that it could not overcome with good management and diversity of products. 

2.  For the Wellness side, Employers would need to self-insure for this arbitrary deductible amount of $3000 a year.  Using the HSA (Health Savings Account) as a model, any amount not used each year could be used as a tax-deferred savings plan to help build a retirement account.  Local businesses may be able to negotiate with local health care providers for the best rates for daily health care. For those Americans that do not have health insurance, I would think this HSA model could be used very effectively as a direct benefit in the form of health vouchers that could be used for day to day health care up to this arbitrary deductible amount.  Any amount not used each year could grow tax-free for the purpose of supplementing social security in retirement. 

I am sure there are many nuances or reasons this kind of plan may have difficulties, but I am quite sure, Wellness needs to be separated from Catastophic Care in order to insure all Americans without absolutely bankrupting our country or totally ruining the for-profit health care industry. 

I would love to have someone estimate the numbers for a plan like this or add any comments.