Dynamic Chiropractic - June 19, 1995, Volume 13, Issue 13|
Wellness Cafeteria Plans and Self-funding High Deductible Programs May Emerge as the Salvation of Chiropractic
Editor's Note: Kelly Jarvis, DC, of Heber City, Utah (NCC 1977) is past president of the Utah Chiropractic Association, and currently serves on several advisory boards for chiropractic. Dr. Jarvis and colleagues Drs. Reed Phillips (LACC president), and Elliot Morris authored, "Cost per case comparison of back injury claims of chiropractic versus medical management for conditions with identical diagnostic codes," one of the scientific articles which were accepted by the AHCPR to draw its conclusions in the Clinical Practice Guidelines on Acute Low Back Problems in Adults. Their article was originally published in the Journal of Occupational Medicine in August 1991.
If it is true that Republicans are more free market oriented, chiropractic may experience its heyday under the new conservative Congress. The probable death of the Clinton-style health reform which promised to lock in all the ivory towers of medicine, drugs, and surgery to permanent levels of inclusion, will result in the re-emergence of all the credible forms of alternative medicine.
Once squelched by big insurance companies that are run by monopoly minded administrators, cafeteria plans are just what the patient ordered, not the doctor!
Instead of buying insurance which dictates every move the employee and his family make (choice of doctor, pharmacy, hospital, etc., as a theoretical ploy to cost-containment, under the cafeteria system), the employer buys a high deductible policy and provides an individual medical account which the employees can draw upon at their discretion.
The medical account is called the "cafeteria plan" because it allows employees full freedom of choice in the provider, hospital, and pharmacy they elect to use. The wise shopping by employee usually promotes the used of less expensive alternatives (chiropractic, homeopathy, etc.), because any monies left over in the medical account can be used as a "rainy day" fund for future medical bills. If employees can achieve a level of savings in the account equal or greater to than the deductible, then they basically have a first dollar coverage with complete freedom of choice, including homeopathic medicine.
Even self-employed people can cash in on the benefits of cafeteria plans by contracting with employee-leasing companies or plan benefit administrators. A staff-leasing company this author consulted has a "customized" cafeteria plan that pays reimbursement checks weekly.
Cafeteria plans benefit the self-employed, the employer, as the employee in four primary ways:
The Working Couple Raising Children
Without Flexible With Flexible Compensation Compensation Gross Monthly Pay ---------------- Salary Reductions $2,200.00 $2,200.00 Health Insurance 0.00 125.00 Unreimb. Health Expenses 0.00 100.00 Dependent Care 0.00 175.00 Adjusted Gross Pay $2,200.00 $1,800.00 ----------------- Taxes FICA 157.30 128.70 Federal Income Tax 201.75 141.75 State Income Tax 88.00 88.00 After-Tax Pay $1,752.95 $1,441.55 ------------- After-Tax Expenses Health Insurance 125.00 0.00 Unreimb. Health Expenses 100.00 0.00 Dependent Care 175.00 0.00
Net Pay ------- $1,352.95 $1,441.55
Annual Savings -------------- 0.00 $1,063.20If you're wondering if insurance companies relish the conversion of their below deductible plans to catastrophic plans, the answer could be self-evident. Insurance companies profit most by taking your large premiums and preventing you from spending them. Catastrophic plans only allow them to collect small premiums. However, some reluctant carriers are now offering catastrophic plans because they see the handwriting on the wall.
The self-employed or the employer could actually "self-fund" only to the difference in premium from the "high" deductible to the "no" deductible insurance with the same results as a cafeteria plan.
Example per participant:
No Deductible High Deductible Premium Premium ------- ------- $400.00/mo. $100.00/mo. = $300.00 Self-Funded Amount $200.00 Cafeteria Participation $500.00 Tax Free Dollars X 12 months ------------------------------ $6,000.00 Annual Tax FreeThe IRS Regulation Code, more specifically defined as, "Use It or Lose It," is virtually eliminated in both cases if these two plans are administered properly.
It will soon be apparent that HMOs and cafeteria style plans will be the two party system in insurance. The HMO will cater to those who do not want to take the risk for allocating their below deductible health care costs themselves and instead would rather lose freedom of choice of provider than to have one pill or exam not fully pre-paid.
On the other hand, the cafeteria plan will appeal to the vast majority of the self-employed who already accept risk and need to improve cash flows and selection. For more information contact B.J. Christensen at 1-800-748-5102 or myself at (801) 654-3032.
Kelly Jarvis, DC, FACO