Cedric Stephens | The problematic side of health insurance

Realpolitik is a political philosophy. The Encyclopaedia Britannica says it is a form of politics that is “based on practical objectives” not on ideals.

‘Real’ connotes things. Hence it is “a politics of adaptation to things as they are (and not what they should be). Realpolitik thus suggests a pragmatic, no-nonsense view and a disregard for ethical considerations”.

The word entered my thoughts as I read Personal Financial Adviser and Gleaner columnist Oran Hall’s article ‘Health insurance as a form of financial protection”, last Sunday.

I agree with many of the things that Mr Hall wrote. That said, his comments about health insurance were based largely on theory and not about how theory is put into practice. The product was idealised. Imperfections, which can derail the most carefully built financial plan, were ignored.

His approach to the task in the context of financial plan development is likely to create unrealistic buyer expectations as I am sure the insurance regulator will agree. Savvy investors, in order to minimise their risks, avoid placing all their eggs, without proper packaging, into a single basket.

Health insurers are pragmatists. They are in business to make money. Private hospitals, some physicians, and other service providers are also profit-seeking machines. Prospective buyers of insurance often face these things.

Today’s article features some problematic aspects of health insurance. They involve two groups. One is persons suffering from mental health conditions. The other is those with pre-existing conditions.

Explicit mental-health exclusion

Consumers who have the patience to read the intimidating 30-page contracts will know that these two groups are but a small group that insurers discriminate against. Others include, for example, those with HIV/AIDS and persons who need medical assistance to combat infertility or treatment for substance use.

Article 18 of the basic contract of a leading health insurance provider specifically excludes “mental illness or nervous disorders, including complications arising therefrom; or complications or side effects resulting from drugs taken for mental Illness or nervous disorders”.

Under the Major Medical section of the same plan, 20 psychiatric treatments are covered at 50 per cent of the charge, up to a maximum of $3,500 per treatment, with a lifetime maximum benefit of $50,000.

It seems rather odd that when the Ministry of Health and Wellness is promoting the idea that there is no good health without good mental health, and expensive foreign plans that do not contain this restrictive exclusion are available, local insurers continue to discriminate against the mentally ill.

Pre-existing conditions

None of the 32 items listed in the definitions section of the local policy explains what a pre-existing condition is. The phrase is introduced in Article 17, which reads: “Once coverage is approved, the insured or his covered dependent(s) must serve a 12-month waiting period from the effective date of the policy for all pre-existing conditions. A nine-month waiting period must be served for maternity benefits before a benefit may be utilised. A six-month waiting period must be served for major medical benefits including surgery, major diagnostics (MRI & CT Scans), and hospitalisation, except in the case of a medical emergency.”

The foreign policy was more helpful. It defined a pre-existing condition as “any illness or injury, physical or mental condition, for which an Insured Person received any diagnosis, medical advice, or treatment, or had taken any prescribed drug, or where distinct symptoms were evident prior to the applicable effective dates”.

Put more simply, Article 17 appears to be saying that if the insured person or his dependent was suffering from a medical condition that had been diagnosed, or for which they were being treated or had taken any prescribed drugs or displayed symptoms of those conditions, benefits would not be triggered immediately. Waiting periods ranging between six and 12 months would have to be served. Medical expenses incurred for treatment during those periods would not be paid by insurers.

Buyer beware

Life, unfortunately, is not all that simple. Here are a few examples of pre-existing conditions from a big North American insurer: “Chronic illnesses and medical conditions, including many forms of cancer, diabetes, lupus, epilepsy, and depression … pregnancy … less severe conditions such as acne, asthma, anxiety, and sleep apnea may also qualify”.

The list is not exhaustive. Use of the term pre-existing condition gives the insurer the right to refuse coverage or deny claims at one extreme and make excessive charges for providing coverage. I am pretty sure that most of our local providers would not disagree with the examples.

I learnt recently that the authorities in New Zealand expressed concern about the poor conduct of banks and insurers in those islands. A recent review found evidence of “weak systems for managing (market) conduct risks and ensuring that good conduct is a priority of these businesses.” Among the measures being proposed is “a ban on incentives which are based on meeting sales targets”.

The life and health insurance segments of Jamaica’s insurance market have historically been driven mainly by sales culture.

Shouldn’t we be moving like New Zealand in the opposite direction to avoid the problems that they encountered? Until this happens, caveat emptor.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com