More on American Mini-Med rules and the Japan expat gap health insurance scam.

This is a part 2 to what I had written a few days ago.

The question I am putting out there is whether America’s Affordable Care Act, which is being phased in between last month and the year 2014, is going to put a crimp in or entirely knock out the scam going on in Japan, where expats are offered a travel insurance or gap insurance policy in place of actual enrollment in National Health Insurance or a related, bona fide company plan under Shakai Hoken. The immediate issue goes to something called “Medical Loss Ratios” or MLR. I explained this a bit before, but the general idea is that the new health care law will regulate how much premium money an insurance company will be able to keep for profit and overhead. For individual policies, the number will be 20%. That means 80% of the premium money must be paid out on benefits for the insured pool.

The people who were anti-health care reform were obviously not going to give up the fight. So what we’ll be reading over the next couple years are articles about how “bad” these rather common sense changes really are. One of the first that I caught is was an article in the Wall Street Journal about how McDonald’s may have to drop its “Mini Med” program ($200 premium for $760 coverage) if it can’t get a waiver from Health Secretary Kathleen Sebelius.

A law professor, Thom Lambert, who blogs at Truth on the Market says that the Journal didn’t exactly get the story right–McDonald’s may not get the waiver, and they just may come up with some different arrangement that will be legal under the new law. So that link is just more information for you if you are following the story.

Concerning the expat gap insurance that a number of Americans use here in Japan, there has been nothing about the new 80% (individual) and 85% (group) MLR rules, even though the topic has been mentioned in the implementation task force of the National Association of Insurance Commissioners.

So one source reporting on the task force’s discussion is saying the long-term gap policies are probably going to come under the 80%/85% MLR rule, effective January 1, 2011. In any event, they will probably fail to provide adequate coverage to be an acceptable health insurance policy when the government requires health insurance coverage on January 1, 2014.

So what’s this all about if you have one of these gap policies?

I don’t know. But don’t be surprised if your friendly, American-based gap insurer tells you that they aren’t going to be offering policies after a certain date. Either that, or that they will be asking you to certify that you are really just “traveling” and not maintaining a Status of Residence in Japan. The reason for this is just simple: those mini-med policies just don’t work unless you can build in a nice margin to cover overhead. You have to pay somebody to sell them, you have to pay someone to administer the policy and contribute to the overhead of the parent company. I’m not sure if it all that can be done for $100 on a $500 premium, (plus make a nice profit in that same $100.)

Again, this is just my view. But if you’re running the gap scam–or if you’re stuck by your employer in an overpriced expat policy of one form or another–this is something to consider.

The insurance company isn’t going to tell you that they are up against a new regulation. First, they are going to use behind-the-scenes means to try and get around the new regulation. Only when that doesn’t work will they go back to you and ask that you make some noise to get the government to give them their way. (Obviously, this is what McDonald’s and its insurer are doing.) When it comes down to win or lose on that, and it’s lose, they are going to push you into Japanese National Health Insurance. “Ooops, you were supposed to be in that one all ALONNNNNNGGGGGG!”

It’s a shame that the expat community here in Japan has had to waste a year on the indecision of the proper local authorities to enforce the rule as is. In the long run–as news seems to be indicating–it just sets people up for a big fall (and a big, back due bill) in a couple years if they stay in Japan.

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