Government-Backed Health Reinsurance Proposal Could Cut Insurance Rates: Experts

Kenneth Thorpe, a health economist at Emory University, has estimated in another study that Kerrys reinsurance program would cost about $257 billion between 2005 and 2014, reduce employers costs about $288 billion and increase the number of people who have health coverage by about 3 million.

Unlike most other health finance reform proposals, “a federal stop-loss pool would generate immediate savings,” Thorpe says.

Americas Health Insurance Plans, Washington, has several members that sell health reinsurance.

“In general, the private market for reinsurance seems to be working, and the companies in the market seem fully prepared to continue playing the role they currently play, using private sector tools and techniques like care management to improve quality of care and contain costs,” AHIP says in a statement about the concept of setting up a government-funded health reinsurance program.

So far, AHIP has not seen enough details about Kerrys proposal to offer a definitive comment on them, AHIP spokesman Larry Akey says.

Critics at the National Center for Policy Analysis, Dallas, and the American Enterprise Institute, Washington, two conservative think tanks, say a government-funded health reinsurance program would be too expensive and might not do much good.

Thorpes research suggests a program similar to the one Kerry has proposed would cost an average of $11,000 per year for each newly insured person, according to Devon Herrick, a senior fellow at the NCPA.

Joseph Antos, an AEI health care policy researcher, says the program would amount to a direct subsidy for employers rather than a successful effort to cut health insurance risk. Large employers and large health plans have a fairly easy time projecting claims experience, and small employers usually solve the problem by buying health insurance, Antos writes in analysis of the government health reinsurance concept.

Moreover, making sure that the employees who trigger the catastrophic health reinsurance payments really qualify for reimbursement could be complicated and expensive, Antos warns.

“Firms must be prepared to satisfy a government auditor demanding proof that an employee who spent more than $30,000 did so in a prudent and reasonable way,” Antos writes.

But Thorpe agrees with Kerry that the government health reinsurance program could make the private health insurance system more fair, by reducing the incentive for health insurers to shut out older, sicker individuals and employers with older, sicker employees.

Reproduced from National Underwriter Edition, October 14, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.