Many health plans and self-funded employer plans are large enough to manage effectively their owncatastrophic risk, and therefore usually choose not to purchase commercial reinsurance. As a result, thecurrent reinsurance market is fairly small compared with the health insurance market as a whole.
Nevertheless, reinsurers have significant amounts of available capital and large enough risk pools tohandle claim variability.
Under "true" reinsurance, risk protection is purchased by insurers for very large (catastrophic) claims.
Insurers can almost always purchase reinsurance with annual limits of up to $5 million, and with limits upto $10 million sometimes available.
Under "stop-loss" insurance, insurance is purchased by self-funded employers to cover the risk of largeclaims. Attachment points (per claim deductible) range from $10,000 to $500,000, with most fallingbetween $25,000 and $250,000. Self-funded employers can almost always purchase stop loss with annuallimits of up to $5 million. Higher limits are available, but are not always easy to obtain.
Issues for Consideration
Many issues need to be considered when designing a government reinsurance program. How theseissues are addressed could affect how the program is implemented as well as its ultimate costs.
1. Would participation in the reinsurance program be voluntary or mandatory?
A program could be voluntary or mandatory. If the program was made voluntary, it would need to bedetermined what level the decision would be made on. There are several choices:
Ø Insurer level—Under this option, insurers who opt to participate in the reinsurance program wouldbe required to do so for all of their health plans, not just select groups.Employer group level—Under this option, insurers could determine to enroll employer group planson a case-by-case basis, enrolling some groups, but not others.
Ø Individual employee level—Under this option, insurers could determine to enroll particularemployees (and any dependents) on a case-by-case basis, enrolling some employees, but notothers.
Ø Individual insured level—Under this option, insurers could determine to enroll particular insuredson a case-by-case basis. This differs from the employee level above, because the insurer couldchoose to reinsure only a dependent, but not the employee.
If participation in the program was mandatory, it could apply to:
Ø All health plans
Ø All self-insured health plans
Ø All health plans, excluding those that are self-insured
Ø All health plans with less than some fixed number of members
Ø Some other subset of health plans
2. What issues should be taken into account for a reinsurance program at the state level, the federal level,or for a program that has both state and federal elements?
Issues that would need to be considered include the interplay of state regulations and ERISA with thereinsurance program, how current state high-risk pools and other state reinsurance programs would beimpacted, issues unique to multi-state employers, and the desirability of uniform benefits and procedures.
3. Will the attachment point be increased over time, and if so how?
The cost of a reinsurance program would increase at a rate faster than underlying medical trend due to theleveraging effect of a fixed attachment point. That is, costs of the program would increase not onlybecause underlying medical costs would increase, but also because more claims would exceed theattachment point. Over time, this leveraging effect would increase the costs of the program substantially,and therefore, the costs to the government in a government-sponsored program would also increase.
Options to mitigate this effect include increasing the attachment point annually by the increase in the
Medical Consumer Price Index, the increase in health spending, or some other measure of health costincreases.
(To be continued… … )
No comments:
Post a Comment