Government-Backed Health Reinsurance Proposal Could Cut Insurance Rates: Experts
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A government-funded health reinsurance program could cut individual and small group health insurance rates more than 7% per year.
Linda Blumberg and John Holahan, researchers at the Urban Institute, Washington, have published those projections in a paper that appears in Inquiry, a health finance journal affiliated with Excellus Health Plan Inc., Syracuse, N.Y.
Blumberg and Holahan were reacting to a health reinsurance program proposed by Democratic presidential nominee John Kerry. Kerry, a Democratic senator from Massachusetts, has talked about setting up a program that would reimburse employers for 75% of the cost of care for insureds whose medical expenditures exceed $30,000 in 2006. In 2013, the "catastrophic threshold" would rise to $50,000, according to Kerrys health care plan.
To qualify for the "premium rebate" pool, employers and insurers would have to provide coverage for all of their employees.
Blumberg and Holahan used federal medical expenditure survey data to assess the effects of several hypothetical government health reinsurance programs.
The researchers conclude that a program that paid 75% of the bills above a catastrophic threshold of $30,000 would cost the government about $41 billion per year for all U.S. residents and $8.6 billion per year if the government limited participation to employers with fewer than 100 employees. If the government offered the program mainly to employers with fewer than 100 employees, those employers would see their health insurance premiums drop about 7.4%, the researchers predict.
Lowering the catastrophic threshold to $15,000 might cost the government almost $17 billion per year but lower health insurance rates for employers with fewer than 100 employees by more than 14%, the researchers add.
"Premiums would be likely to fall by more than these estimates," Blumberg and Holahan write in the reinsurance paper.
The researchers point out that health insurers have to charge high rates for individuals and small groups partly because claims rates for individual and small group policies are hard to forecast. Blumberg and Holahan note that a public reinsurance program has helped cut group rates available through a major New York state health insurance purchasing coalition more than 15% and individual rates more than 30%.
