Greater risk demands greater reward


Wal-Mart Stores Inc. is scaling back the health-care plans available to new employees, sparking fresh criticism over whether the giant retailer is providing adequate coverage to its workers.

As of Jan. 1, the company will offer new hires only two health benefits packages in which the monthly premium can be as low as $11 but the deductible can reach $6,000, according to documents provided to The Washington Post by Wake-Up Wal-Mart, a union-backed group.

Wal-Mart spokesman Dan Fogleman said yesterday that he expected the change to save most employees money. He said a review of the company’s health-benefits plans showed most had opted for a package with a monthly premiums between $70 and $100, and a $350 deductible, but that more than half never paid that much.

I doubt the Wake-Up Wal-Mart documents would have any bias. Just in case they might, consider Wal-Mart’s decision within the context of this study by the Kaiser Family Foundation that found health insurance premiums increased last year. That makes since because my insurance increased about 7% last year (apparently because I had a birthday). It’s a real scandal, except it isn’t.

For some reason, many people believe that consumers can have complete coverage with low premiums and low deductibles. Insurance doesn’t work that way. The greater the likelihood that an insurer will pay claims, the higher the price it will charge for that coverage. This is not complicated. If an insurer disregards this basic rule of finance, it won’t be an insurer for long. Unfortunately, no amount of government can overcome this, contrary to how many pleasant feelings the idea of government-regulated health insurance may create.

Again, I don’t like Wal-Mart, but this action seems wholly reasonable. If its employees don’t use their health insurance enough to hit a $350 deductible, it’s a reasonable assumption that they’d prefer the lower premiums that coincide with their actual usage. That’s wise, not evil.

One thought on “Greater risk demands greater reward”

  1. Nearly all employers are offering low cost high deductible insurance these days. Though I prefer lower deductible coverage, I can assure you that I would take the lower cost solution if I was single since I never go to the doctor.

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