October 22, 2002

Breaking the Back of Private Health Insurance

Some health plans, like those for BC's cabinet ministers and MLAs, are financed on what is called a "cost plus" basis. The insurer pays the claims and bills the government for whatever is paid plus an administration fee. When costs go up they are automatically passed through. When MSP premiums were increased, Health Minister Colin Hansen told CKNW's Peter Warren that he paid his own premiums. A few days later he corrected himself and admitted that his MSP is taxpayer paid. When Pharmacare becomes income tested and subject to higher deductibles, it will be interesting to see if the Campbell cabinet has its taxpayer paid extended health plan automatically make up the difference or whether it will be cut just like the plan for pensioners.

No one should think that it is just public sector pensioners who are going to have cuts in their dental and extended health benefits. In recent years when government made minor changes to Pharmacare or other health benefits, they usually said that many people would not be affected because they have private extended health coverage. Government is now making massive cuts and private coverage cannot absorb the costs.

Thousands of public sector pensioners are going to lose dental and extended health benefits in January. The Public Service Pension Board of Trustees announced that effective January 1, 2003, pensioners will no longer receive a "free" dental plan and the deductible on their extended health plan will rise from $25 to $250 while the coverage is reduced from 100% to 70%. Earlier in the year the Teachers Pension Plan announced that it would cut dental benefits, no longer pay for MSP for its pensioners and that health benefits would be reviewed for further reductions.

When faced with the 50% increase in MSP premiums, the offloading of ancillary health benefits (chiropractors, etc.) and cuts to Pharmacare, the public sector pension plans did not have enough money to maintain benefits. They are not alone. Insurance companies do not have a printing press in the basement for cranking out more money. All they do is take in premiums and redistribute the money to people who have claims. When government offloaded $145 million per year in costs for eye exams, chiropractors and other health services, private extended health plans felt the pressure. According to the service plan for the Ministry of Health Services, Pharmacare will be cut by $88 million in 2003-04 plus another $90 million because it will not be covering normal annual increases. That means private plans will again feel massive cost pressure. The only alternative for the private plans is to cut benefits or raise premiums. Whether you are a pensioner or not, if you have a private extended health plan, expect cuts in the New Year. Dental benefits can be affected because plan administrators may decide to split the cuts over the entire package of "fringe benefits".