Beyond Co-ops: National Healthcare Mutual

I’m not a healthcare actuary; I am a life & investment actuary.  I did pass my health exam on the actuarial syllabus with a high score, but that was almost 20 years ago.  So, take what I say not as expert opinion, but as reasonably well-informed opinion (I hope).

I general, I believe the US needs to move away from insurance with respect to healthcare.  Let people pay directly for healthcare services, and if they must have insurance, let it be with a high deductible, like $5000/year.  If the government then wants to help the poor, let them pay on the deductible.

Wait.  That’s a non-starter.  First-dollar coverage is the holy grail.  Expensive as anything, but that is the perverted goal.

Rationing takes place in any economic/political system, it is merely a question of how the goods and services get rationed.  Price?  Time?  Need (however defined)?

So, the politicians look to cover everyone, and yet control costs in the medical system.  Covering everyone is very expensive, because for the most part, the worst risks aren’t insured.  Those that would pay the highest premiums on a actuarially fair basis don’t buy/get insurance.

Controlling costs means reducing access, limiting doctor freedom, limiting choices, delaying treatment, etc.  Preventive care is a nice concept, but the gains are negligible.

I say let people be free, and get the government out of the picture.  No corporate deduction for healthcare costs.  No HSAs or other tax-preferred benefits (I have one of those).  Scale back Medicare; it is way too expensive relative to the GDP of the US.  Finally, inculcate a culture that recognizes that we are all going to die, and that certain care for the elderly will not be available unless they can pay for it privately.  We don’t want to prolong an expensive death at taxpayer expense.

An Idea

But with all that, let me propose one idea that might help.  I once proposed a program to improve the banking system of the US through the creation of mutual banks.  I thought, why not try the same idea with health insurers?

So, I started reading the news on the healthcare proposals, and I was surprised to find the idea of co-ops being discussed (also).  Some co-ops have been successful in managing costs and access, others not, as many co-ops have failed.

My thought was this: mutual banks could work versus the big  banks, because scale is not much of an advantage in banking.  Big banks have expense advantages, but they take dumb risks.  With healthcare there is a real advantage to size.  Small co-ops can’t compete against major health insurers.  But maybe a big mutual entity could do so.

Instead of a bunch of medical co-ops, better to sponsor/seed one mutual health insurance company that can cover the whole USA, and challenge the big private insurers.  The new entity would be charged with the tasks of reducing the uninsured, and lowering healthcare costs.  Much better than the co-ops idea.

But, nothing is perfect; we haven’t reached Solla Sollew yet.  If the mutual insurer is supposed to subsidize care, how should they do it?  Many of those that are uninsured are bad risks.  Others who might want to use the mutual company might look for policyholder dividends, particularly if they did not use the healthcare system much.

In the life insurance industry, the best mutuals imitate stock insurers, but adopt a longer-term view of their business.  I would assume that it would be true of a mutual health insurer as well.  So, what benefit would come from a large mutual health insurer?

  • Competition against the large managed care providers, lowering prices, kind of like what Southwest Airlines does…
  • Skimming the cream of those who are basically healthy, but can’t easily find insurance.
  • Congress would gain insight into how difficult it is to lower medical expenses, and how difficult it is to cover the uninsured.

The main reason that Congress is having large problems with this issue is that they are trying to do too much.  They are aiming for costless solutions to a costly problem.  They are looking to restrain access to healthcare to a culture that wants its problems solved now.

This is all a fool’s bargain to me, so let Congress charter National Healthcare Mutual, and see how much good it can do, before it returns to them hat in hand.