Some thoughts on privatization of retirement programs, medical plans

By William H. Stewart
Special to the Saipan Tribune

Last of a two-part series

When you talk about privatization— one way or the other—you are talking about investing in a private, profit-driven company. Believe me, companies are in business to stay in business and they don’t like to lose money. In this regard there are some people they just cannot afford to insure because their health condition or age will be too risky and eventually become too costly to the program. Result: don’t offer insurance coverage in the first place.

According to an article in the February Bulletin of the American Association of Retired Persons, Britain’s 25-year experience with privatization of pension benefits “is an experiment now regarded as a dismal failure. They learned the hard way that the costs of administering private accounts can affect returns and reduce the size of a retirement pot by up to 30 percent.” The article went on to point out, “In Britain the competition to sell pension investment products were both numerous and intense. Fees and costs were often not fully disclosed by agents. Rules were poorly designed and rarely enforced. Many workers ended up with poorer retirement since private investments required up front charges and commissions plus annual administrative fees.”

Closer to home what I don’t understand is how five or six people within the administration can make profound and far reaching decisions for almost 9,000 or so people who apparently have no voice whatsoever in the selection of “their” medical and health plan Doesn’t it seem a bit absurd that a central government that is so woefully negligent in meeting its share of a contributing financial obligation to the tune of more than $70 million in arrears now wants to tell almost 9,000 paying participating employees what kind of a medical and health plan they shall have? Hello.

During the early “start-up” days of the retirement fund and its programs such involvement by the central government as an intermediary was necessary but I don’t think it’s all that necessary today even though Retirement Fund trustees apparently have the authority to move the plan to the private sector.

My sweet ol’ granny would say, “Billy, if you haven’t participated to the fullest extent in paying the amount of money you legitimately owe, then it’s not nice to tell others how their money should be spent—or make their decision for them.” How’s that for “granny logic”?

I wonder if it will ever be possible to privatize government at all levels? I would imagine that legislation would be required authorizing the privatization of the medical and health program and defining the responsibilities of all parties involved. Once the members are moved to the private sector the CNMI government will no longer have any responsibility for the member’s “earned benefits.” It would then seem that GHLI members, both retirees and active government employees, would be giving up a secured promise of health care coverage once the privatization process occurs—a promise that may have partly influenced their selection of, and devotion to, a public service career in the first place.

Then when premiums aren’t collected on a timely basis, eligibility will be terminated. Also some guarantee should be made that if the plan is privatized any such arrangement must include a “mainland provider network.” Otherwise those on the mainland and elsewhere could experience high “out-of-pocket” costs since these retirees could conceivably be outside the area of “network coverage.” Why is this important? If you are traveling in the States or Asia and get hit by the #10 bus—when they scrape you off the street it would be nice to have insurance coverage. On the other hand, if the accident is only “border-line fatal” and you have a little time left—you might want to look for a funeral parlor that will give you 10 percent off if you can walk or be carried in.

I can recall occasions where one got the impression that some people in the CNMI expressed an attitude that seemed to reflect a desire to be a part of—but separate from—the United States. I hope the geographic coverage of any privatization plan that may evolve is not confined solely to the Marianas archipelago. Any medical plan should provide eligible coverage within the United States, its territories and possessions. This is necessary for students studying off-island; vacationers in the U.S.; those with second homes on the West Coast and other areas and officials traveling to Washington and elsewhere. As dear ol’ granny would point out, “wherever you go, there you are.” You simply cannot beat the life credentials acquired by the old folks. In short, the health and medical plan’s geographic area of policy coverage should certainly include the U.S. mainland, Guam, and Hawaii.

The privatization process in the NMI will permit the administration to shift the “risk” from itself to the private sector. By doing so, the full cost will no doubt be transferred to the members. The result could very well be an increase in premiums of at least 50 percent when the private plan is implemented. Guess who will be expected to pay the increase?

Am I nuts or not to believe that those effected should have an input in any final decision regarding such a plan and the use of their money? That’s what I would call self government and the democratic process.

If you have an existing medical problem, have a family history of a certain medical condition, or if you are grossly overweight, diabetic, over a certain age, etc., you might consider yourself lucky if you are permitted to even qualify for medical coverage even at a higher premium. If you don’t believe me contact one or more organizations listed at the end of this article and inquire about the availability and cost of coverage for you and your family as based upon the specifics in your particular case. Check out the cost for individual membership and also as participating within group coverage. The costs differ. Make yourself knowledgeable—be informed !

The cost of medical insurance coverage varies according to a number of factors, e.g., whether the person is a member of a group plan, or single; number in family covered; extent of coverage and so forth. For an example of “indicative” costs, several “selected” contact numbers and sources of information for medical insurance coverage & price quotations follow: Google – “Health Insurance Quotes” or toll free 1-800 977-8860 (U.S. dates and times); Blue Cross – http://sales.bcbs.com; AARP – Health Care Options – 1-866-334-9304 or www.aarphealthcare.com (For a supplemental plan only).

Additamentum Scripti: I’m not paid to write articles and I’m not told what to write. I address issues I think are of interest as a result of encouragement from people requesting that I do so.

(William H. Stewart is an economist, historian, and military cartographer.)