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June 02, 2004


Rick Stevens

Excellent idea. Too bad no one is bright enough or courageous enough in congrees to do anything with it.

Having worked for a few health plans in my time, I did have one question: most plans have 'stop loss' insurance for catastrophics so I'm not sure how much it will necessarily change the premium equation. Maybe someone with experience in that area could clarify this.




My understanding is that the key mechanical difference is that when health plans buy stop-loss coverage today, they pay premiums and presumably their experience affects their premiums. Therefore, their risk is smoothed over time, but not between plans.

A system that provided the stop-loss through tax revenues would also level the risks between plans.


John Fembup

The insight that is missing here is failure to see the distinction between the cost of insurance and the cost of health care.

Any health insurance company could reduce the cost of insurance tomorrow by 50%. Why don't they do that? They would go broke is why. Because reducing the cost of insurance (premiums) does NOTHING to reduce the cost of health care.

In this light, one can immediately appreciate that the Kerry plan is mostly a shell game. By shifting catastrophic health care costs to the federal government, the cost of insurance to the insurance companies would be reduced, and so could their premiums. But catastrophic health care costs would go somehwere. They do not disappear. Where would they go? To the federal government. The government would then have to fund these costs. Only way the government can fund anything, is with tax dollars, and the public still pays. So because the overall cost of health care does not change, the overall cost of insurance does not change. It's a shell game.

Now, can administrative efficiencies save money? Of course, and although that is a different subject with an entirely different set of pros and cons, let's assume that the Kerry plan could produce administrative savings on the order of 5%. For someone paying $300 a month for private insurance, that is $15 a month. For someone paying $100 a month (in a group insurance plan for example) the savings is $5. Hardly ear-spltting news.

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