Foodstuff Benefits

Imagine if food were a standard corporate benefit like health care.  After all it is a necessity; how can any responsible employer fail to provide it?

Of course each company won’t be able to offer its own foodstuff benefit so, instead, there will be major third-party payers in the system.  When you go to the grocery store, instead of taking out your Visa or American Express, you’ll whip out your United Foodstuff card instead.  Then there will be a long pause, consultation with the manager, and a few phone calls to determine what sort of copay you are required to make on the various items in your shopping basket.  You’ll end up having to put the Twinkies back because they are excluded from your foodstuff plan.

Some food stores are off-limits to you because they do not accept your foodstuff provider.  Others require that you pay in full and then request reimbursement from the provider.  There is a lower copay for some generic store brands than for name brands like Coke and Pepsi.

Shopping on vacation is a real problem since United Foodstuff doesn’t have agreements with any grocery chains south of the Mason-Dixon Line.  Out of the country, fuhgetaboutit.

Months after each shopping trip you are still receiving bills for the unreimbursed portion of the expense of the nutrition consultant who vetted your shopping list after the fact to assure that you haven’t bought ingredients either singly or in combination that you might later sue either the grocery store or your employer over.  You also receive a letter urgently requiring that you prove that you have not claimed reimbursement for food used to make any meals covered by your children’s school lunch program or Meals on Wheels.

When your employer decides to switch foodstuff carriers, you have to change your shopping habits both to be in-network for the new carrier and to minimize your copay since the rules have changed.  However, if you live in Vermont, you can count on the fact that the State requires coverage for both tofu and maple syrup in all policies and, in New Jersey, cannoli never require a copay.

You must be very careful not to have a gap in foodstuff coverage between employers; individual foodstuff policies are very expensive – some say prohibitively so. And most food stores are very reluctant to deal with people with no coverage at all. Prices are 50% higher for food not bought under a foodstuff plan.  Even when you get a new policy from a new employer, pre-existing cravings are not covered.

The value of the foodstuff coverage you will be given is an important part of the total compensation you receive from an employer.  When weighing job offers, you may want to use a consultant to figure out the relative value of the foodstuff portions of these offers.  But, unless you are protected by a union or an Enron-type executive contract, your employer is free to change the foodstuff plan at will after you are hired.

“OK,” you say. “Enough.  This is plainly absurd”

So is employer-funded healthcare, even though it does have an insurance as well as a bill-paying component.

Third party payers add enormous cost and complexity to the health care system.  Health care choices are distorted by labyrinthine plans which often seem to be designed NOT to pay benefits.  The health care delivery system is largely incapable of charging for care EXCEPT through these plans.  When individuals pay directly, even at the point of care, they are charged more even though the cost of collecting from them is much less.

Employers are motivated to cut the cost of the benefit.  Third-party payers are motivated to pay out in benefits as small a portion of the premiums they receive as possible.  Participants (us and the health care providers) are motivated to game what we perceive as an unfair system.

Employers are only in the healthcare benefit business because, during World War II wage and price controls, these benefits were a legal alternative to raises (see this post on unintended consequences) and because there is currently a tax benefit to having employers rather than employees pay for healthcare.

It is now past time for two major changes:

Employers should pay people salaries with which people buy whatever food, toys, and health care they want (noted that it is debatable whether people should be allowed to go without coverage but this isn’t an employer issue).

Paying for routine healthcare like checkups, immunizations, drugs at reasonable costs and reasonable quantities, belly-aches, cuts and bruises, etc. etc. should be just like any other predictable expense such as food or transportation (noted that it is debatable – at least as long as there is government backup to health care – whether people should be allowed to go without checkups and immunizations). Absolutely no reason for a third party to be involved and all the reasons in the world for them not to be.  Insurance for major unpredictable expenses is entirely different and is a legitimate insurance function which must be separated from paying routine bills and from paychecks.

As you can probably guess, more posts on this to come.

Comments

[Tom Evslin]

Abby:

Your totally unexpected (but very reasonable) thought is why I like analogies so much. They always cut both ways.

In fact there is a form of what you ask suggest for new cars. They have a warranty (insurance) and, often, this includes "free" routine maintenance as well which I'm sure does reduce warranty expense. I just saw an ad where a new BMW (I think) called its service center to say it needed a lube and the service center called the owner.

This works, I think, because the dealers have networks to provide service wherever your car is likely to be and so there aren't the hassles associated with out of network billing and different standards of service.

You have unearthed a good example of an hmo approach that seems to work.

[Abby]

Mark Johnson,

This is actually something I've wondered about. Why can't you buy HMO insurance for your car. Most people don't get their oil changed nearly enough. If you had a prepaid service fee with reminders to get your oil changed, you could put some predictability in your life.

Getting your oil changed regularly would catch the major problems, and if you did have a $2,000 repair (which can be a lot of money for some people) you'd know that it was covered.)

[Mark Johnson]

I love it! This is brilliant! When I was reading some of the comments, I thought of another apt analogy: car insurance. I don't call Progressive when my friend spills a drink on my leather interior, my door gets dinged because I opened it too fast and hit a telephone pole, or when I need my oil changed. A legitimate insurance function is one that mitigates risk for an individual. If there's a chance (albeit low) of a liability greater than an average yearly income, that's a great opportunity for insurance to pool risk. But, there's no reason to insure routine maintenance. The cost of people abusing the system (getting too many oil changes, having their little dings fixed all of the time, and not worrying about what their friends drink) will cause the average cost to go higher than when individuals make their choices. I can decide if I want the $100 oil change at the Audi dealership or the $22.50 special by Hong down at the corner. And, since I'm going to be paying for a lot of the costs of wear and tear, you can bet your bottom dollar I'll be taking care of my car!

Likewise with us humans. Catostrophic health insurance makes clear sense to insure people again something tragic. But health insurance for routine procedures encourages system abuse and bad health behavior.

[Chris]

Your article pretty much summed-up the shortcomings (to put it mildly) of the current system. However, as others have pointed out, chronic health problems and historic illness will basically wipe out any chance for reasonable health coverage for the unfortunate. Also, I find it extremely unlikely that businesses will translate money saved from health care costs into salaries. But, I am eager to read your further analyses. You usually do not disappoint.

[Will]

Tom, Great tongue-in-cheek comparison of the entitlement system gone awry. There is a solution out there.. Health Savings Accounts!! Put the money and buying power back into the people responsible for their own (and their families) well being, then allow the year end remainders to be rolled into a private retirement account so that future care is funded as well.

[Abby]

How funny! I was just about to e-mail you asking for your thoughts on this. Have you read Matthew Holt's healthcare blog? It's superb; he's a bit of a socialist, but he's got great observations.

On billing: a friend of mine has a father who practices medicine in a small town in NH. Some people from New York came in to his office. It turned out that their insurance wouldn't pay him, but his bill was less than their co-pay!

One big problem is that outside of certain highly regulated markets it can be impossible to buy individual health insurance. Also, remember that most of the costs in the healthcare system are born by 20% of the people. All the HSAs in the world aren't going to control the skyrocketing costs of catastrophic care.

People are not, however, as rational as they ought to be, and chronic care can be expensive. Often times it falls disproportionately to those who are not as well off. If you're sick a lot, it's hard to make the big bucks.

My father once stopped taking his heart medications, because they were expensive and he was symptom free. His doctor never explained what they did. Well, of course, he landed in the hospital with a heart attack--which was covered by insurance.

A friend of mine has a brother who was diagnosed with schizophrenia. That's a lifelong condition. The drugs are expensive, and in the beginning you need a lot of attention from doctors. Even if you're not hospitalized, it's routine care, but it's more than most people can afford. Without those drugs the individual can't possibly be a productive member of society. With them he can.

The French economy is pretty messed up, because its Labor regulations are too restrictive, but its healthcare system looks pretty good to me. The Swiss one isn't bad either. Ours is simply the most expensive and a royal mess.

My main question is this: why aren't business leaders: the big ones like GM and the smaller entrepeneurial ones organizing for a political solution to this problem? People stay underemployed in jobs they don't like for the health benefits. It's moronic.

[Aswath]

Apart from the issues related to unexpected expenses, I am curious to know your thoughts on handling the expenses associated with caring for chronic conditions and how to protect individuals from the acturial games that can be played on them (that they are prohibited from the system to better the acturial tables).

[Candice]

This is a pretty good way to describe the general broken-ness of the entire thing.

As far as I can tell (having done some work on the billing/insurance side), the fact that uninsured folks pay higher is a side-effect of having to charge the insurance companies more than you need in order to get anything out of them. There's an entire industry built around getting money out of insurance.

[Brad Respess]

"Employers should pay people salaries with which people buy whatever..." Very provocative and very risky for any single company to implement. The size of the company can make it nearly impossible to change to a better provider quickly or choose the system that is best suited to the individual needs. Choice is reduced, cost is added to the system, and most individuals are hurt in the process.

However, a few individuals with risky health conditions may find it nearly impossible to get coverage. For auto insurance, I am the cause of my risk factor. The worse I drive, the higher my premium. For health insurance, my genes may be the cause of my risk factor (smoking, eating habits, exercise is like auto insurance.) No matter what I do, the risk of having breast cancer may be something I cannot reduce to the "average".

[Brad Respess]

"Employers should pay people salaries with which people buy whatever..." Very provocative and very risky for any single company to implement. The size of the company can make it nearly impossible to change to a better provider quickly or choose the system that is best suited to the individual needs. Choice is reduced, cost is added to the system, and most individuals are hurt in the process.

However, a few individuals with risky health conditions may find it nearly impossible to get coverage. For auto insurance, I am the cause of my risk factor. The worse I drive, the higher my premium. For health insurance, my genes may be the cause of my risk factor (smoking, eating habits, exercise is like auto insurance.) No matter what I do, the risk of having breast cancer may be something I cannot reduce to the "average".