Innovative Idea: Government Health Reinsurance Program
By Andrew Buffmire
Updated: 10/30/2009 05:24:49 PM MDT
What are we trying to accomplish with health care reform? The following basic objectives seem to be universally accepted:
» Health care coverage for all with elimination of denial of coverage for pre-existing conditions.
» Economic participation by all in whatever health care coverage program is adopted.
» Wellness care and individual and provider incentives for better health outcomes.
» Fair payment to insurers and health care providers for the services they render.
The current debate is whether or not to include a public option to create an alternative coverage mechanism and to force resolution of the above objectives. Let’s make it clear, the U.S. already has a quasi-public health care system. Medicare is the government health care program for the elderly, and Medicaid is the government health care program for the poor; government employees (state and federal) are insured through government-funded and administered programs and the Veterans Administration provides for the ex-military.
This is an innovative idea. It’s the first time we’ve seen such a proposal. It’s worth a careful read. Andrew Buffmire is willing to think outside the box. It’s probably too late in the health care discussion, but right now the ball is in the air.
The open issue is how to establish health care coverage to those otherwise denied coverage or unable to afford coverage. A corollary concern is how to incentivize the young and healthy to participate in insurance programs so that the real benefit of insurance can be realized: providing coverage and sharing risk across a population and over time.
What is proposed is a government-sponsored reinsurance program. Reinsurance is a model universally used in the competitive private insurance market to address extraordinary risk. This is insurance for insurance companies. Indeed, Warren Buffet, a prime example of competitive success in free-market America, owns through Berkshire Hathaway a reinsurer.
A reinsurer assumes risk for claims above a defined target. In the instance of health care coverage this may be $250,000, $500,000, $1 million or some other prenegotiated amount and may be limited to select high-risk groups to be covered by reinsurance.
Such an approach would address the open-ended risk that private insurers otherwise assume against prospective insureds with pre-existing conditions or chronic illnesses. Since the government currently is the de-facto insurer of last resort, such a program would only eliminate the requirement of impoverishment before coverage takes place. Additional required elements should include:
» As a condition to reinsurance, participating insurance companies could not deny coverage to insurance applicants or rescind coverage once in place.
» Access by individuals to government reinsurance coverage would require the purchase of health insurance through a private insurer participant in the program.
» Regular health checkups and lifestyle choices would be a condition of participation.
The benefit of this approach is to positively change the underwriting risk of private insurers in a manner that leads to greater incentives for private insurance participation while addressing the open-ended risk that insurers otherwise assume when insuring high-risk individuals.
By this approach society benefits from true community-wide rating and risk sharing and the insurers and providers can focus on preventive care to reduce underwriting risk rather than the avoidance of high-risk individual care. Such an approach would provide universal care and keep the benefit of competitive insurers and care providers while providing wellness-care incentives and mitigating the individual and societal cost and risk of catastrophic and chronic illness.
Andrew Buffmire is a technology entrepreneur and has been a business executive with two Fortune 500 companies. He was formerly assistant dean of the University of Utah College of Law, a practicing attorney, an assistant attorney general in the Utah Attorney General’s Office and primary author of the Utah Antitrust Act.