Reinsurance is an insurance product designed to protect health insurers against the financial risk of covering high-cost enrollees — such as people with pre-existing conditions, chronic diseases or cancer — who could cause a company to pay out more in claims than it receives in premiums and become insolvent. In a study conducted by the University of Minnesota School of Public Health, recently published in INQUIRY: The Journal of Health Care Organization, Provision, and Financing, researchers used data from a national survey of health spending to estimate the costs of implementing a national reinsurance program.
Researchers, led by professor Dr. Lynn A. Blewett, estimated health care expenditures in the individual market and then estimated the costs of a national reinsuarance program. They also examined the costs of similar state reinsurance programs in California, Texas, Florida and Illinois.
“Reinsurance is one of the few policy tools attracting bipartisan interest to address instability in states’ individual health insurance markets,” said Dr. Blewett. “Providing an ongoing stable source of funding for state-based reinsurance would go a long way in providing needed financial support for states interested in pursuing this option.”
The study estimated that: