Tuesday, February 7, 2012

The MS&L as a Product Line

I've been vague about the specifics of the Medical Savings and Loan because I see multiple ways to implement the concept. I first conceived of the plan as a product line to be offered by an insurance company. I later explored the idea as a massively distributed business with no insurance company involved.

Currently insurance works as follows: Actuaries analyze the risk of a group. Underwriters speculate on the cost of the risk and decide how much they need to charge to cover that risk. The insurance company then bills this premium to all the members of the group.

The insurance company now has a single large pool. When members of the plan need care, they place a legal claim against that pool.

In the product line version of the Medical Savings and Loan, the insurance company simply starts doing the accounting of medical expenses and premiums as if policyholders were putting their own money on the line.

To create the full experience of self funded care, I eliminated the deductible and co-payments and changed the titles of insurance agents and claims adjusters to "Health Care Advocates." Policyholders would have access to a web site that would show their health care experience presented as if they were directly paying for care.

This program would include a projection of future health care expenses, to encourage policyholders in financial planning. People would occasionally have meetings with the advocates to discuss financial planning.

In standard insurance, the insurance company analyzes the experience of a group over a year. This new program still looks at the experience of a group over a year, but it also analyzes the full life experience of each policyholder.

The savings accounts, of course, would be real. Policyholders would build equity in their accounts. This equity would be affected by health care decisions.

The goal of the program is to re-establish the concept of self-funded health care. Each quarter, you would get a policy statement showing your past health expenses, your projected health expenses and how much you have saved in your account. If your savings are insufficient for your projected expenses, your employer would be advised to increase the amount you deposit in your account.

Policyholders would be given greater latitude in negotiating health care with providers directed by the advice and consent of the advocates.

The loans are a bit gimmicky. Policyholders will have access to health loans to assure they have adequate buying power to pay for unexpected expenses (or preventative care).

The loans take two tracks: If a policyholder has normal health expenses, he would be expected to pay back the loans.

If a person has an abnormally high ratio of medical expenses to income, the accounts will go into review. If the review determines that the policyholder is doing a good job holding down costs, the review board is likely to write off the loans. If the person has difficulty managing care, the policyholder would be moved into a managed care.

The Medical Savings and Loan as a policy line is for companies that want to maintain a relationship with an insurance company, but want a product that gives their employees greater control over their expenses.

The new product line will tell employees that, if their life time ratio of medical expenses to income is below a given amount, they are expected to self fund their care from their savings account. The program would take a slightly larger chunk of one's paycheck than a standard insurance policy, but this extra money will build up in the employee's savings account.

The goal of the program is to help people build sufficience savings to cover their expected expenses. Young/healthy employees will periodical meet with the advocates to discuss their savings plans and project future expenses.

The loans are a gimmick to assure that policyholders have adequate buying power for their health care needs at any given moment.

If an employee has insufficient funds for a medical expense, they will get a loan. This will likely trigger an increase in the amount they pay into their savings account each month.

The program will compare the ratio of medical expenses to income. If a person has unusually high expenses, the policyholder will either see their loans written off or they will get put into a managed care program.

Policyholders will see this new product line as insurance with a catastrophic deductible based on their lifetime income.

This product line has policyholders building a substantial amount of equity in their savings accounts. People who can self fund their care are expected to self-fund their care.

The Medical Savings and Loan as a policy line preserves the insurance company intact.

Policyholders with low health experience now completely own their risk. To these people, the insurance company is now just a financial service provider.

The insurance company will continue to underwrite the catastrophic health expenses of a pool and will underwrite the loans.

The insurance company will charge employers a premium to cover the cost of catastrophic care, re-insurance, the cost of the loans, actuarial expense, legal expenses and infrastructure expenses.

The insurance company is still huge.

This program would have the same amount of money as standard insurance. The policyholders would be taking a more active role in their health care. Most will be self funding their care which will restore the pricing mechanism in health care.

I originally designed the Medical Savings and Loan as a policy line to be offered by an insurance company. It would be ideal for small companies that wants to give people greater direct control over health care expenses.

I later developed a massively distributed model that breaks down all of the functions of the insurance company into small independently owned businesses.

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