Thursday, November 08, 2007

Employment benefit complexity: we are sheep

Baaaaaaa said the sheep, on the way to be ... sheared.

My wife and I have just selected our family's employment benefits for 2008. There were 4 basic health plans, two indemnity and two "health savings accounts" (they used some other name this year). In addition, one could create another 11 variants of one of the four plans.

The plans had wildly different pre-tax monthly paycheck deductions (so the true cost varies depending on one's tax bracket). They also have different providers, different deductibles, different out-of-pocket maximums (but are they really maximums?), different networks, and a complex mix of co-pays and percent uncovered for each transaction. Not to mention x-rays and labs.

Some costs that might be post-tax dollars can be covered by a pre-tax flexible spending account -- but you must be sure to spend all of it. Then there's a Dependent Care account, but be sure your spouse earns at least as much as what one claims -- or that's lost too.

If I had a team of lawyers, statisticians, and software developers, I could create simulations based on our known risk factors and run them against the plans. I would use Monte Carlo methods to create random variations around means, and then produce a probability distribution of likely costs.

Oh, wait a minute. It's the insurance companies that have that team. We just have ... a coin toss.

I feel like I've just signed a contract with Satan -- or, worse, Sprint Minnesota. I had to sign the contract, but I know it's hopeless. My immortal soul will be stuck in Hell

Do the French put up with this kind of stupidity? I like to imagine not.

Americans are sheep.


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