by J.E.B. Johnson, MD

Let me preface this comment by stating I am not an actuarial. I hated statistics and am no fan of insurance companies. That said I would like to know why patients and the US government think that health insurance companies should accept unlimited risk? My car insurance has limits, my homeowners insurance has limits, my malpractice insurance has limits.  Why should my health insurance not have limits?

How can a company successfully do business with unlimited risk? They must build a substantially larger cushion into their premiums when they are forced to accept unlimited risk . How can we lower the cost of insurance? We must accept more of the risk.

Affordable low cost insurance could be developed based upon several principles:

1. A federal insurance template that would define a basic unalterable policy. Let’s call it the “FIT 2011” plan for Federal Insurance Template.
2. This plan would have a defined limit of risk or “lifetime benefit” of say $1,000,000.
3. This plan would have a defined allocation of risk i.e. 80/20.
4. The patient would always be “out of pocket” for 20% whether for outpatient office visits, tests, medications or hospitalizations.
5. Vendors could opt to file claims for the patient or not.
6. By using the “FIT”  template insurers would be permitted to market that policy nationwide.
7. All terms and conditions, inclusions and exclusions would be specified and unalterable in the template.

The benefits of such a plan would accrue as follows:

1. A federally defined unalterable policy would allow consumers across the nation to compare “apples to apples.”
2. Limiting risk to a set “lifetime benefit” should lower cost by returning some actuarial sanity to the process.
3. Allocation of first dollar risk to the patients should make them more cost conscious.
4. The patient not the insurance company would be shopping for and negotiating discounts. The insurance companies could no longer skim the middle.
5. The cost of filing and managing claims and collections could be drastically reduced.
6. Using the “FIT”  template insurers would be allow and promote national competition between insurers.
7. The unalterable “FIT” policy would allow consumers to make comparisons of policies based solely on price and service.

Insurers and consumers would be welcome to choose other policies with expanded benefits or supplements but no alterations or additions or changes would be permitted to the FIT 2011 template.

If the electorate desires, a system of premium subsidies could be developed at the federal and or state level based upon financial need, age or health condition. Additional benefits such as federally funded no fault malpractice insurance should be developed to encourage community based health solutions such as free clinics and true charity care hospitals.

This offering is a simpler private sector solution for wider and  more affordable coverage. We need to avoid expanding the federal bureaucracy which always causes costs to go up.

J.E.B. Johnson is a family physician.

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