I am looking for a dual deductible fully insured health product. Does

[Guest KGibson]

I am looking for a dual deductible fully insured health product. Anyone have any suggestions?

[Larry M]

what do you mean by a "dual deductible"?

and are you referring to a group plan or to an individual plan - pre or post medicare?

[Larry M]

Okay, let us assume you are referring to a group plan, pre-medicare, and would like to offer an option for employees between a high deductible medical plan with a low premium, and a lower deductible plan, with a higher premium.

Most carriers will allow you to develop an optional plan for your employees.

If employees are given a choice, then they are intelligent enough to choose, on average, that plan which they anticipate will give them more for their money.

So, we can assume the "users" (includes those who are healthy but who expect to use medical services for every small item - prescriptions, sniffles, headaches - and the not so small pregnancy benefits as well as those associated with chronic ills and major problems) will take the low deductible plan, while the "occasional users" (those who can afford the higher deductible and those willing to pay for the smaller items themselves) will take the high deductible plan.

So, what will the net result be?

Theoretically, the overall claim costs will be less than if all the employees were in the low deductible plan. Theoretically, the carriers should charge less, in total, for the combination than for the low deductible plan by itself. (Sometimes even the high deductible plan participants will have claims which would be paid under the low deductible plan.)

However, the costs per employee in the low deductible plan will increase significantly (with a correspondingly healthy increase in premium rates) because there will be no "non-users" subsidizing the "users" portion of the plan's benefits.

If you can establish a retrospective premium rating for the optional plans, then your overall costs (excluding costs of administering a dual option) should be less than if all were in the low deductible plan.

However, on a prospective only basis, the carrier will assume the worst and, most likely, charge a premium rate for the low deductible plan which will allow it a large margin of error because, in advance, it does not know how many users will buy the plan and how much those users will benefit.

The result will very likely be a total premium for the two plans which is much larger than the premium needed in retrospect.

Even though the two plans combined have a high participation rate, the mix of participation is very important and will not be known until after the employees make their decision.

Another item difficult to price, is the amount of increase in claims which might occur because the low deductible plan participants feel they must get more back than the difference in premium between the two plans. The cost of this factor is very difficult to estimate in advance.

So, in summary, if you thinking of offering your employees a choice between a standard and a high option plan,

a. yes, it can be done, and

b. the overall benefit costs may go down, but your total premium charges may not.

[by the way, there are some agencies in California (and I assume elsewhere) which have made arrangements with a number of carriers to allow each employee within a firm to choose among a wide variety of plans and carriers(!). Here employee A can choose a high deductible plan with carrier A, employee B can choose a hmo plan with carrier B, employee C can choose another plan with carrier A, .....

[My guess is these plans have premium rates which are loaded for selection.]