Health fund changes? How does it work now?
Changes at our health fund? How does it work now?
So, the rumors are flying that there may be changes coming down the pike at the MHF. This will not necessarily be a bad thing. The newly former union trustees often discussed how we might cover more people with worthwhile coverage without risking the fund, and couldn't find a way. If the new admin solves this conundrum, I'll be the first to congratulate them on a job very well done! But, it is worth taking a few minutes to understand how the fund works now and why the current structure has kept the fund healthy since 2014. At least until this year, which looks like it will prove a bit of a disaster for the fund (due to a mix of astronomical claims and poor investment returns).
So, first thing to understand is that we run a self insured plan which hires Aetna as our "ASO" provider. Stands for Administrative Services Only. Aetna manages our claims, offers us programs to save us money on prescription drug claims and certain medical condition coverage and provides us access to their network. But it is the MHF that actually pays claims, not Aetna. So, the amounts we take in from employers and participants' contributions do not go to paying premiums. Those amounts directly pay all the costs of providing coverage.
Simple, right? Except for one inescapable fact. Those amounts only pay for about 50-70% of the insurance the plan offers. Which brings us to the nuts and bolts of how our plan is structured. The plans we offer rely on 2 forms of "breakage". Simply put, breakage refers to the amount of money the fund takes in IN EXCESS of the amounts necessary to qualify an individual for a certain level of plan. So, people who bring in contributions of more than $500 a half-year but less than $2000 will qualify for Plan B. The excess of their contributions then subsidizes the other plans we offer. (Plan B is the only one of our plans that pays for itself.) Same is true of those who more than qualify for Plan A or even Plan A+. This breakage is specific to our union plans.
The other form of breakage supports health insurance worldwide. It stems from the contributions collected on behalf of participants who are healthy and do not use the plan, or use it very little. Healthy people effectively subsidize sick people.
Remove breakage from our plans and the whole thing comes crashing down.
Many members have spoken to me over the years about how "unfair" all this is. That they should be reimbursed any overage because it is "their" money. 2 reasons why this cannot happen. First, the ACA (Obamacare) took away a group plan's right to decide to reimburse these amounts and made it illegal to do so and second, employer contributions are negotiated. While the amounts must be earned by an individual player and must be banked to that individual's account, these contributions are contractually mandated to go TO THE PLAN. As such, they do not belong to an individual, but to the Plan and the Plan can, and must, use them to keep itself solvent.
As with all things union, there is, herein, a notion of shared sacrifice. We are part of a community and it is this concept of community that keeps us alive. If we do not support each other, not only in the realm of insurance but in every aspect of our professional lives, we will cease to have any benefits at all.
Part 2 to come. How could the plan be restructured safely?