The Office

Richard Quinn

AFTER NEARLY 50 YEARS in the employee benefits profession, there are a few conversations that stand out—and they all relate to money. What people do, or don’t do, when it comes to money never ceases to amaze me. All the stories below are true.

I received a call from a recently deceased employee’s wife, followed by a call from the same employee’s other wife, both named Mary. One was in New Jersey and the other in South Carolina, and both were claiming his group life insurance. Each family had three children. There followed a long quarrel over who gets what. “Mary” was the designated beneficiary; that was no help. I let the insurance company sort it out.

I’ll never forget another employee’s wife, who yelled at me that she was holding me responsible if her children died from Lyme disease, because our health plan didn’t cover vaccinations. “You don’t expect me to pay with my money, do you?” she shouted. It was then that it hit me that spending on health care was different from other purchases. Here was a person who was concerned about her children dying, but not to the point of spending $60. This story comes to mind every time I hear about one of those surveys that finds that many people believe the cost of prescriptions and health care co-pays is “unaffordable.”

Then there was the call from a new widow, asking about her survivor’s pension. I had to tell her that no survivor benefit had been elected. “But my George told me I would get everything I deserved,” she said.

That was in the days before spouses were required to agree to any waiver of their survivor benefits under a pension or 401(k) plan. Before 1984, when the law was changed to require spousal consent, it wasn’t unusual for surviving spouses—almost always the wife—to be left with no income.

This is still an important issue, especially for Americans with no employer retirement plan. When planning for retirement, I rarely hear about planning for two lifetimes. The death of the first spouse often brings financial hardship, especially for women. The poverty rate among surviving wives age 65 and older is 20%, versus 15% for surviving husbands.

Our company’s benefits plan offered several health insurance options. The options all covered the same range of doctor’s visits and medical procedures, but with different deductibles, out-of-pocket limits and, of course, premiums. After a few years, I learned the hard way how powerful adverse selection can be. While many who opted for the Cadillac plan had only routine or even no expenses, a core group were exceptionally big consumers of health care. The plan became a large financial drain, prompting us to raise the premiums substantially.

We did everything we could to explain to employees that the Cadillac option, with its $150 deductible, was no longer a good value. But the word “Cadillac” was powerful, because employees assumed it meant best. One day, an employee—who was enrolled in the Cadillac option—stopped by my desk and asked me what he should do. I sat with him for some time, explaining that it was impossible for his current option to be the best choice, given that the extra premiums he would pay were larger than the potential out-of-pocket cost on any of the other options. Even if his family incurred $1 million or more in health care bills, the difference in premiums he paid would always be higher than his possible out-of-pocket costs on the other options.

When we finished, he said he finally understood. As he was leaving, I asked if he knew what decision he would make. “I think I’ll stay with the Cadillac plan,” he replied. The unrealistic fear of health care costs is a powerful motivator. Eventually, with the agreement of the unions, we simply eliminated the option.

That brings me to my saddest memory. A few months after starting work, a young woman got married and came to our department to change her beneficiary designation to her new husband. Just a few weeks later, the women was dead, the result of a bizarre accident. She and her husband were in a park with a cliff at one end that overlooked an interstate highway.

Within two days of the death, the new widower was in my office, looking for his insurance payment. What had happened? The husband told the police that they were playing leapfrog and, with the last leap, the woman went over her husband—and over the cliff and onto the highway.

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Still LearningHealthy ChangeSaving Ourselves and Required Irritation. Follow Dick on Twitter @QuinnsComments.

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