If small business advocates want the private reinsurance market to cure what ails the small group health insurance market, the federal government should be prepared to subsidize the reinsurance.
Witnesses delivered that message here Thursday during a House Small Business Committee hearing on the possibility that a reinsurance program might be able to cut small businesses’ benefits costs.
Rep. Nydia Velazquez, D-N.Y., the chairman of the committee, asked during her opening remarks whether reinsurance might be able to help small businesses overcome the effects of lack of competition in the small group market.
Janet Trautwein, executive vice president of the National Association of Health Underwriters, Arlington, Va., noted that 19 states already operate health insurance reinsurance pools and that 11 other states have reinsurance pools that are inactive or in the development stage.
The pools do not necessarily do much to ease health coverage cost burdens, Trautwein said.
“Reinsurance pools are currently funded by premiums paid by participating carriers,” Trautwein said. “Up until this time, reinsurance pool success has been marginal in terms of its ability to produce cost savings in a given state market, primarily due to the size of current pools. The main reason for this is that the pools are largely voluntary and small, with only a few participants to share in the cost of the reinsurance.”
Some people believe health insurance reinsurance pools would work better if the federal government helped them, Trautwein said.