Creating a single national health insurance pool is not likely to destabilize the economy by supplanting the private health insurance industry. This industry insures a relatively small percentage of the population and holds very little of the risk such insurance implies. In effect, insurance companies function as middlemen, bundling risk packages to distribute to other, larger companies and so serve a limited purpose. Were insurers to handle claims for a national pool as they do for the Medicare program, any destabilization to the economy more broadly would be further minimized.
For an excellent, though somewhat dated, discussion of these incentives, see R.Korobkin, “The Battle Over Self-Insured Plans, or ‘One Good Loophole Deserves Another,’”Yale Journal of Health Policy, Law & Ethics5, no. 1 (2005):89-136.
Aetna Insurance, for example, has a multi-year reinsurance contract with Vitality ReIX to provide coverage for its large group coverage if losses exceed what it expects. See Aetna, Press Release, Aetna Announces Transaction with Vitality Re IX (January29, 2018), available at <https://news.aetna.com/news-releases/aetna-announces-transaction-with-vitality-re-ix/> (last visited October 26, 2018). Excess Medical Reinsurance, also purchased by health insurers, functions more like stop loss insurance, providing coverage for catastrophic claims, typically those that exceed $1 million. For a more detailed discussion of these products, see D. Hoffer and M. Troutman, “Managing Catastrophe — Managed Care Reinsurance Market Trends and Catastrophic Medical Claims Developments,” Contingencies, March/April 2018, available at <http://contingencies.org/managing-catastrophe-managed-care-reinsurance-market-trends-catastrophic-medical-claims-developments/> (last visited October 26, 2018).
19.
This is a lower deductible than the national average, but is used for simplicity. See, for example, KFF, 2017 Employer Health Benefits Survey: Employee Cost Sharing (Sept. 19, 2018), available at <https://www.kff.org/report-section/ehbs-2017-summary-of-findings/> (last visited October 26, 2018), finding that the average deductible for a single insured in employer-sponsored plans is $1505.
20.
These claims are increasing, however. In California, there was one child who apparently cost the state Medicaid program $21 million, S.Karlamangla, “One child, a $21-million medical bill: How a tiny number of patients poses a huge challenge for Medi-Cal,”Los Angeles Times, July16, 2017, available at <http://www.latimes.com/politics/la-me-21-million-patient-20170716-story.html> (last visited October 26, 2018). Of particular interest here, Wellmark Blue Cross in Iowa disclosed paying $1 million a month for a young boy with hemophilia complications in 2017 and used that case as a reason to exit the marketplace, though it was highly unlikely the company did not have a reinsurance policy that would pay for his care. See T. Leys, “Iowa Teen’s $1 Million-Per-Month Illness No Longer a Secret,” USA Today, May 31, 2017, available at <https://www.usatoday.com/story/news/nation-now/2017/06/01/iowa-teens-1-million-per-month-illness-no-longer-secret/360919001/> (last visited October 26, 2018).
Stop Loss Insurance Model Act, available at <https://www.naic.org/store/free/MDL-92.pdf> (last visited October 26, 2018). There are other important issues with low attachment point stop loss insurance because purchasers can use this type of insurance to avoid having insurance companies comply with state capitalization requirements and other consumer protections, but that is outside the scope of this article.
It should be stressed here that these plans are commonplace. BCS Insurance, for example, has stop loss plans tailored to Blue Cross Blue Shield insurance companies and advertises stop loss attachment for claims as low as $25,000. See BCS Insurance Company, Medical Stop Loss, available at <http://bcsins.com/medical-stop-loss.html> (last visited October 26, 2018). It also promotes its reinsurance plans in part by arguing that reinsuring a number of plans will “creat[e]… economies of scale that generate increased actuarial credibility[.]” See BCS Insurance Company, Excess Reinsurance, available at <http://bcsins.com/excess-reinsurance.html> (last visited October 26, 2018).
