Open Season

Where I live you can hear gun fire in the far distance hills at this time of the year. The first time I heard it was years ago when we first moved in. I was told it was open season.

Open what I asked? Open season was again the reply. Hunters were after quail and this was the time of the year when it was permissible. Elsewhere, deer and boars are the targets.

I came to conflate open season with open enrollment for health plans. When you think about it, hunters looking for quail are not a whole lot different than health plans looking for customers. There is only one time of the year when they are easily bagged.

For me, this is the time of the year when I get mail from Medicare Advantage plans seeking to lure me from traditional Medicare Part A and B. They make promises about extra goodies and lower premiums. I prefer to have more control over my healthcare including having a voice in whom my doctor is and what hospital I can utilize. Still, every year it seems the Medicare Advantage health plan hunters bag more prey. Seniors living on a fixed income have to make economic decisions.

For many employees of private enterprises this time of the year also provides an opportunity to make changes in health plans. That decision is often based at least in part by how much will be taken out of the person’s paycheck as a partial contribution to the premium paid by the employer.

A similar dynamic occurs for public employees who often have more health plans to choose from than is typically the case for private sector employees. The public employer will pay only a certain amount for health plan coverage. If a health plan’s premium is greater than that amount, the public employee pays the difference.

In a rational world where employees have an incentive to make decisions based upon economics, this annual dance of health plans should lead to those plans having lower premiums gaining more customers. That is what is happening with Medicare Advantage plans with their lower premiums and extra goodies.

It is not happening, though, for many private employers and most public employers. The reason is that employers don’t like confronting their employees with this kind of economic decision. Often, a floor for what the employer will pay is established based upon union agreements and/or political pressure. I saw this dynamic when I sat on a nonprofit provider owned health plan board which often had the lowest premiums but could not gain as many new members as it should have.

In California, Kaiser has a large marketshare. The inertial you must overcome for an employee to switch his health plan away from Kaiser is immense. I used to joke that Kaiser was like a cult and once an employee was captured that was it. In all fairness, a part of that “stickiness” was due to Kaiser effectively meeting its members’ needs, albeit at a higher premium than other plans.

It helps Kaiser,though, when an employer, particularly public employers, establish the Kaiser premium as what it will pay. Health plans which offer equivalent coverage for a lesser premium don’t gain new members in that scenario. Employees have no financial incentive to change their health plan. And so it goes and has for years in California.

I was recently asked in response to another blog entry what I would do to make health care more affordable. The first thing I would do is to make sure employees have real financial incentives when making health plan choices during open enrollment. I believe you would see health plans begin competing more robustly for members if they felt that lowering premiums would bring in more business. That does not happen now and until it does it will be open season for ever rising premiums.

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