In an Oct. 20 interview Lawrence Mitchell said Guam employees still expect somebody else to pay for their health care.
Mitchell a California-based actuary doing business on Guam has provided his particular forecasting skills to organizations on Guam since 1980.
In the early days he said benefits to employees were not as sophisticated as those being offered today. Mitchell said when he started doing business here he found that the government of Guam was shouldering a lot of the responsibility of providing health care as the largest employer on the island. “The government took care of it. That philosophy about insurance stayed on Guam. It has got to where people want somebody else to pay for every little thing that’s wrong with them.”
Mitchell recalled when he first arrived two health insurance companies offered 100% health care coverage. Mitchell said while Guam’s health insurance pattern is based on history it is not just unique to Guam and pointed to problems U.S. car manufacturer General Motors was experiencing “What was once offered as a benefit then became almost a rite of passage. Now a want became a need.”
Due to the rising cost of health care medical benefits are becoming harder for employers to offer he said.
“Once people started prepaying for their medical care by buying insurance a lot of money became available and people started wanting more; the more they got the more they had to pay for it and it becomes a never-ending cycle. It became such that the cost of what they wanted was growing faster than the economy was growing faster than their wages was growing faster than the money that the employers had available to pay for this.” He added “So you come into this bind where suddenly medical care costs are too big a portion of the overall compensation available for employees and that’s when you have a crisis. You may not be there yet. You may not be at the point where General Motors and even the union recognized that it’s got to cut back on the promises it’s been making to its employees. So finally these people got together and said you either cut back on what we’ve been giving you and you take less in the future or we’ll go out of business and you’ll have nothing.”
Mitchell said there must be a systemic change in the way health insurance is used and provided.
“I don’t expect an overnight miracle. I don’t expect people talking about it to make the big difference. It’s going to happen when companies start going out of business can’t afford to pay for insurance product or when employees see if they don’t cut back on the use of the medical care they’re not going to be able to get it from their bosses. People are too comfortable but change will happen when things become uncomfortable. I don’t know when that will happen … here on the mainland or anyplace else.”
Mitchell is an employee benefits actuary. He has a background in group insurance and employee retirement plans. He is a consultant to insurance companies governments employers employee associations and labor unions.
He said the major part of employers retaining employees is based on salary but that benefits help assuage employee’s concerns about the future. Mitchell said the mass migration of employees out of Guam into prospering U.S. states is not to seek better benefits but better salaries.
Services he provides include retirement plans for the long term. “The goal of the employer is say to have new people come in and older people retire but he would want the older people to retire with an income that is sufficient for them with Social Security to pay for a modest living. Let’s say I want an employee to prepare to retire at $400 a month. I would need $400 000 in a pot at age 65. The employer then comes to me and asks if I could help him figure out a way to pay the $400 000 benefit 30 years from now. It’s like this mortgage that he has. You can put a big down payment now and have small payments later or have it interest-only for a while and then have a balloon payment at the end. He [the employer] can pay for it over a period of time slowly. There are all sorts of flexible contributions he can make so that when the employee leaves 20 to 30 years from now the money will be there.”
Mitchell then reviews the plan over time and makes changes based on the needs of the employer and employee.
Mitchell also helps to find the right insurance benefits for employees.
“When you get into something like health insurance it’s really short term – it’s immediate. My job when I am working with these employers is to help the employers find out what kind of plan a) he can afford b) will provide benefits that are meaningful to the employee and c) doesn’t price him out of the business so that he can’t pay for medical anymore.”
Actuaries find ways to manage risk. The profession is said to require a combination of strong analytical skills business knowledge and understanding of human behavior that allows actuaries to design and manage programs that control risk.
Mitchell helps clients prepare finances to overcome possible future risks. Those risks include life death disability sickness and retirement. “The question is how can the employer best utilize his money so that he just doesn’t throw it into a well and have so much of it wasted? My job is to find out what the employee wants find out what the employer wants find out what they can afford and help them budget for these goods.”
While Mitchell said employees should start taking up more of the responsibility of paying for health care the Journal asked about insurance plans that offer rebates for consumers not using their health insurance. He said that he knows instances where couples switch from the rebate health insurance program to a regular health insurance provider to make use of the benefits during pregnancy and then switch back to the rebate program after birth. “All it does is destabilize the market.” MBJ
