Govt health plan at risk of falling into death spiral

The current situation showed that the CNMI government’s group health plan has been “adversely selected” and is at “serious risk” of falling into the “death spiral” due to its great appeal to sicker population, according to the government’s heath plan advisor.

Health plan consultant Karen Bauder said in her Nov. 14 report that “adverse selection” exists when a sicker population has an incentive to select a particular health insurance plan.

She said the adverse selection is evidenced by the fact that the plan is comprised of 45 percent retirees and 55 percent active members.

She said reliable data is not available and no attempt was made to determine whether it is in the death spiral stage.

“However, if not, this is a serious risk unless changes are made,” said Bauder.

When adverse selection becomes severe, she said, “the plan may fall into the death spiral, meaning there will be no rate at which the plan is likely to be profitable as higher and higher rates will only attract a sicker and sicker population.”

Bauder said the government’s health plan has been adversely selected against because its benefits are “richer” than competing private sector plans.

“Richer benefits attract sicker enrollees,” she said.

She said the plan covers retirees, particularly those under Medicare age, which competing private sector providers do not.

She said such group of retirees are generally sicker than actives.

Lastly, she said that since it offers employment and retirement benefits that are significantly richer than those in the private sector, the government has probably attracted a sicker population.

“Sicker people are generally attracted to government jobs,” she said.

NMI Fund administrator Karl T. Reyes agreed saying that government employees usually get a private health insurance plan “when they are strong and healthy.”

When they are about to retire, they shift to the government’s group health plan.

“When members are healthy, they are in the private sector. When they retire, they go to the government. And the government carries them,” he said.

There are about 10,000 members of the government’s group health plan, including dependents.

Bauder, who led in the government’s negotiation for the privatization of the plan, advised against pursuing it primarily due to increased costs.

The team rejected the proposal offered by lone proposer SelectCare, represented locally by Calvo’s Insurance.

SelectCare Plan is underwritten by Millea Holdings, a large Japanese insurance group.

The Babauta administration had wanted to pursue a cafeteria-style privatized program where members could choose services from more than health care provider.

The Fund said privatization is now a dead issue.