Tuesday, September 1, 2009

The FHIIC - A Healthcare Compromise?

This is an idea that struck me while I was driving the kids to the babysitter last Wednesday. It came completely out of the blue (as Rush was talking dead Ted Kennedy during the time), so I figured I'd flesh it out and put it out here for comments.

For clarification, if I put this through my test of principles and philosophies, it may not pass. But even if it's not an idea that is the ideal, it may be a piece of the solution (but not the whole) that doesn't involve the government running health care, just regulating it. So let's not start arguing the entrenched positions on this one, but find the positives and negatives, and improvements on the idea that follows:

The Federal Health Insurance Insurance Corporation

My model for the FHIIC is the long-running FDIC, the entity that insures our bank deposits. Under that system, banks pay into the FDIC a percentage of their deposits. In turn, the FDIC covers people if the bank should fail.

The FHIIC would work similarly. Member insurance companies would pay a small percentage of their insurance premiums into the FHIIC for use in dealing with failed insurance companies. Membership would be compulsory for larger insurers (operating in at least 26 states) and optional for smaller insurers. The benefit for the smaller insurers would be, of course, that they could slap that FHIIC on their sign and use it as a selling point. In the event of a failure, the FHIIC would take over payment of benefits on existing claims, as well as assistance in transferring coverage to another provider under the same terms. And other than the fine print, the insurance companies continue to offer coverage as they do now.

As for the fine print:

1. All member providers would be required to hold a percentage of their premiums in investments or banks, so that they don't run a high risk of failure. This means a percentage has to be in safer investments. I don't have specific percentages, but you get the idea.

2. Providers agree to certain practices in offering insurance. These include:
  • No denial of coverage for good-faith omissions or omissions that do not relate to the coverage in question (except where fraud can be proven). this addresses the rescission problem.
  • Providers are required to offer products to insure any individual. While the nature of those products may be structured to allow a company to limit their liability (no payouts for overdoses for drug addicts for example), this mandate insures that everyone has access to some form of insurance.
  • Providers will be required to pay claims in a timely matter when they are submitted (within 60 days), based on a “usual, customary and reasonable” fee schedule, put together by FHIIC regulators and doctors.
  • Providers must, if leaving the FHIIC, refund the prior year's premiums to all insured individuals who wish to transfer their coverage to a FHIIC-insured company.
3. For those companies that fail, they will be required to forfeit any profits in any fiscal year they fail, as well as forfeiting any severance pay over the company average upon dissolution of the company, in order to cover the costs of dissolution and payment of claims within the established timeframe (still 60 days).

Now while this will not address all the individuals currently uninsured, it will begin to close the gap. In addition, it creates a safety net program that allows the government the ability to regulate the insurance industry, but not give them direct control over payments. Combine this with some of the other reform ideas out there (tort reform, free clinics, direct payment of insurance premiums) and we may find the long-term answer to fixing the problems of our health care system.

Compromise anyone?


Satyavati devi dasi said...

Has a health insurance company actually ever failed? I don't recall hearing about that.

TRUTH 101 said...

I think insurance companies are already required to pick up the policies of failed insurance companies Patrick. It's been a long time since I had any need to know this but I think the term was "participating."

Of course, with my single payer system the program you suggest which would only add to the beuracracy would be needless.

Patrick M said...

Saty: Of course. AIG jumps to mind. Oh, we bailed them out, didn't we?

Most insurance companies will find a way to reform or survive even partial failure. But with enough regulation, it becomes a system that doesn't allow real failure. And yes, I have a post on it coming up.

101: The plan is kind of about patching the existing system rather than scrapping it. And as I indicated, this is just an idea I had, and it's not necessarily in my list of ideal solutions.

dmarks said...

All of the arguments about how bailouts diminish responsibility are competely maximized in healthcare if we have "single payer".