I believe the current approach to a national health program is not well suited to the nation’s needs and times and will likely founder as did the earlier Clinton plan.

I am a retired manufacturing chief executive who lives on East Chop for part of the year. From 1977 to 1983 I set up corporate risk management plans covering the disparate health plans of these companies. I am a Republican, a fiscal conservative and an advocate of a single payer national health plan with proper long-term funding, and health care as a right, not a privilege, for all our citizens and legal residents. But I know we are a long way from achieving this and we must look instead to the art of the possible.

In the late 1970s I discovered that Equitable Life Assurance and other insurance companies were willing to provide, for a fixed and reasonable fee, administrative services such as calculating actuarially the premiums appropriate for an operating unit given the census of the ages and scale of benefits afforded that group. Taken separately these groups might have from 50 to 400 employees and their health experience in such small groups could vary widely year to year. When all these groups were taken together, however, the variability of the experience of thousands of employees became very predictable.

Since a predictable expense needs no insurance, there is no need to pay an insurer to bear that risk. We set up an employee health benefits trust for which the tax code already provides a tax exemption, just as for the premiums paid to insurers. We paid the “quasi-premiums” calculated by Equitable into that trust, and paid claims out of it, bearing the risk of net losses almost entirely within the group. Only insurance to cover the most catastrophic losses by individual employees was purchased. Such plans are widespread in industry today.

I believe a national health plan on this model would be more palatable across the political spectrum and could provide inducement for the insurance industry to support same. Right now they will fight tooth and nail because proposed plans in Congress have the prospect of destroying their business in the long run. Furthermore, replacing their teams, developed over many decades, with a federal bureaucracy will result in many dislocations and inefficiencies which will only increase the nation’s health care bill.

I believe the government should agree to shoulder responsibility for all catastrophic health events, say arbitrarily, those costing more than $50,000. Without exposure to these catastrophic losses, insurers can reduce premiums precipitously. The experience of small employers would be far less volatile.

The catastrophic losses of citizens in a population as large as that in the U.S. would become highly predictable statistically so that actuaries could pinpoint the cost to the nation to be funded in some equitable way.

The tradeoff for insurance companies would be acceptance of all risks presented to them without regard to age or preexisting condition, in short, open enrollment. Uninsured citizens would be able to enroll in individual plans of their choice at an affordable premium. With everyone covered by at least some minimal plan (individuals could opt for richer plans if they wanted), the opportunity for adverse selection would be minimized.

Carrying insurance would be mandatory. Insurance companies would stop being risk bearers and yet retain much of their organizations, collecting and competing for fees for administrative services. This competition, where efficiency would be rewarded with greater profit and growth, would also drive down premiums.

I believe an approach modeled on the above would garner much broader political support in Congress.


The writer lives in Lake Forest, Ill. and Oak Bluffs.