Our plan just completed its annual open enrollment.  Members are permitted to change medical or dental plans; to add or remove dependents, and change life insurance options.

Open enrollments highlights certain flaws in our current system.

The logic of an open enrollment is compelling.  The object of any insurance is to spread the cost of any risk over time and over as many people as possible.  Open enrollment helps to spread the risk over time.

The risk of health care is different than other risks that we insure against.

We buy life insurance to insure against death; auto insurance to protect against an automobile accident; homeowners insurance to shield against damage to our home.

Those hazards (the technical term) generally occur without warning.  No one is likely to approach their insurance agent to buy auto insurance because they anticipate an auto accident in the near future.

Illness, on the other hand, can offer some warning.  Someone may experience symptoms and has not seen a doctor.  The doctor may have recommended expensive surgery.  Or maybe it’s just a young couple planning to start a family.

Open enrollment is the only opportunity that insurers have to spread risk over time.  By insisting that people enroll only during a specific time period, the insurer reduces the risk that someone is only enrolling because they know they have an approaching medical expense.

It may seem unfair to the person with an immediate and pressing need.  But to the others in the group who ultimately foot the bill, it makes perfect sense.  It is one reason why a mandate – an employer mandate or an individual mandate – makes sense.

Medicare has its open enrollment rules.  Their annual open enrollment for Medicare Part B is from January through March each year and is not effective until July 1 of that year. Continue reading →