When is Insurance for Dependents a Bad Idea?

In a recent social media discussion about the adoption of Alaska HB23, “Creating a fund in the Department of Public Safety; providing for payment of certain medical insurance premiums for surviving dependents of certain peace officers or firefighters who die in the line of duty; relating to contributions from permanent fund dividends to the peace officer and firefighter survivors’ fund; and providing for an effective date”, Andy Holman (past Anchorage Education Association President and presently Anchorage School Board Member) stated, “Way too long coming.” While I am typically a fan of Representative Andrew Josephson (the bill’s primary sponsor), this bill was and will continue to prove to be, a mistake.

The Bureau of Labor Statistic’s “Census of Fatal Occupational Injuries” tells us that there are as many job related teacher deaths as there are job related fire department deaths [OK, I will come clean about the appropriate consideration of the BLS data below]. Does that mean that Andrew will soon be fast-tracking a similar bill for teachers? Somehow I think not.

One can dramatize the situation as much as one wishes, but where there are as many occupational fatalities among teachers as among firefighters, the actuarial impact on their families is THE SAME. In fact, in many schools teachers DO walk towards the fire, as it were, but I don’t think we should be ensuring health care coverage because of the nature of the job someone is doing (even if we misperceive the dangers inherent in that job because we are emotionally involved), but because it is the right thing to do.

But we should back up a bit and ask first why this was necessary, or more importantly, whether there was some way to avoid the unforeseen consequences presented by the bill, while still providing health care for the families of deceased firefighters and cops. And that means answering the question, “Why is it that legislators supposed that firefighters could not provide for medical insurance premiums for an eligible surviving spouse or dependent child through an IRA, life insurance, or related instrument?” And if such options were available (and they were), instead of carving exceptions into state law, wouldn’t it have made more sense to transition state medical care to health trusts, and allow the health trust to provide such services until the covered parties are otherwise eligible?

All persons covered under this bill would already be entitled to COBRA  (which, at a cost no more than 105% of the existing premium, provides for continuation of coverage on the occurrence of a qualifying event, like death of the policyholder).  All employees through whom coverage would be realized through this bill are also provided or offered life insurance. The longest that COBRA (or alternative program) would have to be paid for would be 18 years, the time it would take an infant to reach majority (26 if we want to look at current insurance “standards” for parental coverage). A rational response to this situation might well be to provide adequate life insurance or similar instrument that would cover COBRA (technically COBRA today only runs 18 or 36 months) or alternative.  The cost for such insurance would be about $50/month. Yes, I said $50/mo.

The demonstration above gives rise to the possibility that some are seeking to “double-dip” based on milking an emotive response. How is it “double-dipping”? The covered employee class already negotiates for a salary and benefits based on their “heroic” status (walking towards the fire, as it is argued). Stripped bear of the chest beating, we are really talking about a way to avoid asking the employer for an additional $50/month, or more to the point, moving part of the employment cost away from the employer directly (but as we might expect, this will have an indirect effect on dollars available for other purposes, and the current situation, where the Senate Majority is unwilling to adequately fund education in the State, is just one example). So the fireman gets paid on the basis of his heroism, and then we also provide additional remuneration (off the books, as it were, on the same basis), while denying that benefit to every other public employee.

The fact of the matter is that whatever the reason for the loss of the employee’s life, it will result in the loss of medical benefits for their dependents, and that will present a family crisis to a family already in crisis. No responsible family member would leave his or her family in such a precarious position, so we really have to assume that all such persons are already implementing a solution such as described above. The issue, then, is not really providing the tools for coverage, but providing additional benefits to one occupation, not provided to another occupation on the basis of something other than risk of occupational fatality for that occupation. That, to be blunt, is an emotional response that carves exceptions with unforeseen consequences and promotes making non-data driven decisions.

An emotive response should have nothing to do with the need to make sure that the families of anyone who dies on the job retain their health insurance until otherwise covered. By emotive response I am referencing the perception that someone deserves something “extra” because of the perceived nature of the risk, despite whatever the stats might reveal about the actual risk, the actual risk being determine actuarially. As noted, public safety personnel negotiate compensation on the basis of the risk they experience (one of the reasons people argue about the fact that the job is less risky than people like you believe) – and we should not promote this “double dipping”  while the employee could provide for family coverage on the employee’s death.

But teachers? Look, if you want to reward public safety personnel for being “heroes”  that is fine (though remember, you are also doing that when they negotiate for pay), but I (and thousands of others) think that teachers are heroes too. If you really want to extend benefits based on heroism, your policy should be based on actual risk, and the actual risk is far from your perceptions of the risk.

When comparing US schools to Finnish, the difference, again and again, comes back to Disrespect that the population holds for teachers, and the ramification of that disrespect eventually “blossoms”. In addressing teacher victimization, the American Psychological Association states:

According to the U.S. Department of Education, from 2011-12 , approximately:

  • 20% of public school teachers reported being verbally abused.
  • 10% reported being physically threatened.
  • 5% reported being physically attacked in schools.

From 1997-2001 1.3 million nonfatal crimes (including 473,000 violent crimes) were committed against America’s teachers.

Yes,  the fatal injury rate is actually some 5 times greater for firefighters than for teachers (the rate for firefighters is 4 per 100,000 full-time equivalent workers) but the rate for firefighters is still a third of that for bus drivers! The point I am trying to make is that actuarially the fatal injury rate for firemen is actually lower than many other possible public employee sectors, so to single out a sector with a lower rate for extra benefits is emotional and not data driven, and as such would also arguably inappropriate public policy.  It would make more sense, I suppose, to use the occupational fatality rate as a multiplier to address public subsidy for COBRA or some such.

I think instead of this law, which is a mistake, the families should have clearly identified the cost of life insurance necessary for COBRA for 18 (or 26) years and negotiated for that. In the alternative, the legislature should have made the coverage available to everyone, which is to say, instead of me, me, we should be talking about us us 😉 And, of course, instead of trying to kill the health trusts functioning so well in this State, the State should be promoting the expansion and networking of such trusts. At that point we have coherent policy that meets the long range needs of Alaska residents. What we have now is a poor knee-jerk emotional response to what is really a non-problem, and legislation that really does need to be adopted as been sidelined instead.

 

Leave a Reply


Your email address will not be published.

*