by Ed Schirick
Health-care costs are increasing for everyone and will continue to do
so for the foreseeable future. These costs are driven by a variety of
factors, including our litigation-minded society, advances in technology
and treatment, as well as the lifestyles and attitudes of Americans regarding
healthy eating and living. It is widely acknowledged there is a health
crisis looming in America. In addition, there is a crisis in health insurance.
As the cost of insurance continues to rise, individuals and families find
themselves making difficult decisions about health insurance. The result
is more individuals and families are incompletely insured or uninsured.
This is a growing problem with no immediate solution in sight.
As insurance costs go up, employers cut back — sometimes reducing
coverage, reducing financial support, or increasing deductibles and copayments.
Anxious employers may use all or combinations of these actions. Some employers
are offering lower cost Managed Care, or Health Maintenance Organization
(HMO) options. These plans reduce reimbursement for health-careservices
provided by physicians, institutions, and organizations not part of their
approved group or network. These employer decisions put more financial
pressure on employees to pay for health-care expenses out of their own
Historically, nearly every camp director purchased Blanket Accident
and Sickness Medical insurance for campers, and where appropriate, for
staff. The rationale behind this was to promote public relations with
customers and facilitate health care for campers and staff with doctors,
hospitals, and pharmacies near the camp.
In addition, general liability insurers encouraged this practice by
excluding medical payments to campers under their general liability policies
on the basis their claim departments were not set up to handle a large
volume of small medical-only claims.
As costs for health care continued to escalate, the cost of Blanket
Accident and Sickness Medical insurance increased too. Gradually, encouraged
by camp directors seeking to reduce expenses, some insurance advisors
began to recommend dropping Blanket Accident and Sickness Medical insurance
in favor of using the camper family’s health insurance.
This made some financial sense, but what about the camper whose family
doesn’t have health insurance? How does the camp secure timely,
appropriate health care when there is no insurance company to bill for
The insurance industry responded by developing a hybrid Accident and
Sickness policy that would apply on an excess or secondary basis. Essentially,
the parent’s health insurance pays the expenses first, until their
benefits are exhausted. Any amount remaining unpaid, such as a deductible,
coinsurance, copayment, or uncovered amount, would be paid by the camp’s
Blanket Excess Accident and Sickness Medical policy up to the limit of
the policy. But, what happens to expenses incurred by an uninsured camper?
The Blanket Excess Accident Medical coverage available from most of
the insurers serving the camp industry has a feature that lets the policy
coverage drop down and become primary when any covered person (camper
or staff) doesn’t have primary health insurance. This is a valuable
feature. Many camps switched from primary to excess policies to take advantage
of the modest rate reduction for excess coverage offered by the underwriters.
In addition to health insurance cost increases, the cost of running
your business continues to increase as well. In the past couple of years,
property and casualty insurance premiums have increased dramatically for
many camps. So it will come as no surprise that some camps have responded
to growing property and casualty insurance premiums and the cumulative
effect of increased general business expenses by electing to drop Accident
and Sickness Medical Insurance entirely.
Why is this significant for the camp risk manager? Every action we take
in business has some impact — some positive, some negative. The
elimination of your back-up risk transfer program (insurance) designed
to stand behind the parent’s insurance definitely creates some risks.
Some of the risks might not be immediately apparent, and some could have
a significant, unintended impact. Here are some thoughts about the risk
factors in this situation for you to consider beforehand.
For example, will the local physicians, hospitals, pharmacies, and other
health-care institutions in your community accept the parent’s health
insurance plan entirely? Some doctor’s offices don’t want
to be bothered with the paperwork of completing claim forms for insurance
companies that are outside their area.
Will these local businesses and professionals be willing to bill the
parents, or will they still look to you and your camp to guarantee payment
for any open items not fully reimbursed by the insurance company? If this
is the case, how will you pay for these outstanding balances? Some camps
confronted with this challenge have set up bank accounts to pre-fund expected
expenses. The money to open the account in the first year of such a new
arrangement is often the premium the camp would have paid to the insurance
company had they continued to buy insurance.
What impact will your decision have on the availability of health-care
services for your campers and staff when needed? Could relying entirely
upon the parent’s insurance possibly increase the costs for camper
health care? Health-care providers may have a couple of sets of rates,
one for private payers, one for network-affiliated patients, and another
for insurance companies. Which rates are your campers being charged?
Don’t Risk a Lot for a Little
Generally, the risk of litigation increases when customers are unsatisfied.
There are many stories about parents who didn’t sue, because medical
bills and out-of-pocket expenses for a child’s injury were taken
care of by the camp, or by insurance, or because the camp director went
out of the way to help. By forcing the cost of medical expenses, including
potentially higher out-of-pocket copayment, coinsurance, and deductible
expenses, back onto parents are we unwittingly inviting increased litigation
to recover these expenses? What impact might increased litigation have
upon the cost and availability of liability insurance?
If you find yourself in a budget squeeze looking for someplace to cut
costs, analyze your situation. Don’t react quickly out of frustration.
Take some time to consider the potential impact of dropping Blanket Camper
Accident and Sickness Insurance or any insurance for that matter. Remember
insurance is a risk transfer tool and only one of the risk management
tools available to you. So when you drop insurance, you must use another
risk management tool to address the situation, because the risk doesn’t
go away, and you can’t just ignore it.
If you decide after patient, thoughtful consideration to drop insurance
for medical expenses and transfer the costs 100 percent to parents, don’t
fail to anticipate and address issues like the ones we listed above. Try
to keep the bigger picture of risk management in front of you and your
organization at all times.
Ed Schirick is president of Schirick and Associates
Insurance Brokers in Rock Hill, New York, where he specializes in providing
risk management advice and in arranging insurance coverage for camps.
Schirick is a chartered property casualty underwriter and a certified
insurance counselor. He can be reached at 845-794-3113.
Originally published in the 2004 May/June
issue of Camping Magazine.