This is an attempt to “think out of the box”. There still exists an open path by which we can solve many of the problems that have eluded us because a broad coalition of Americans will not cooperate. Furthermore, none of the present bills can solve our most important problem: pool pollution. Pool pollution is omnipresent in American Healthcare, having resulted from allowing private insurers to partition everyone into disjoint sub-pools with wildly assorted ratios of healthy to less-than-healthy individuals.
Single payer insurance has already been compromised away. But there may exist another means to get most of its advantages. This would be accomplished by indirection, using a mechanism called "reinsurance". We can still reorganize the current system of competing private insurers into a symbiotic network of insurers, all acting in coherence with one another. The emergent structure can be fashioned such that the whole network becomes better at improving America's health care than the sum of its elements can do so acting on their own initiatives.
This proposal calls for fundamental health care reform. It creates an American Pool Equalization and Reinsurance Agency, (APERA), which can also provide a new funding mechanism that pays much of the cost for mandating universal coverage.
There are a litany of ways for private health care insurers to preferentially cover only the healthy among us and avoid covering the sick. This includes their tendencies to avoid insuring individuals with preexisting conditions, to exercise rescission rights against their more costly individuals, to arbitrarily deny reimbursement for particular situations; to reject applications deemed risky, to charge higher rates for some individuals or groups than they charge for others, to employ mechanisms designed to cherry-pick among individuals or groups, etc. Insurers also employ strategies to control which potential customers' eyeballs will be targeted by their advertisements and other marketing tools.
Such insurance practices are outrageous. Cherry-picking always pollutes the remaining pools, because all such actions take place within the context of playing a zero-sum game. Any advantages enjoyed by one insurer, by calling the more healthy individuals out from the totality of another pool, must always come at the expense of those individuals which they have managed to avoid whether it was they who were consciously avoided or some of the others. For they have henceforth been reorganized into a less than previously healthy pool, without ever having known that such a reorganization has taken place.
Because of the economics of health care it is mainly the individual policy holders, small business owners and the government agency which supplements their premiums, who actually pay the price of this pool pollution. Competing private insurance providers can simply increase premiums to compensate for such insults, and this happens automatically as premiums adjust over time. But individuals, employers, altruistic organizations such as charities and the government itself have no ability to protect themselves from pool pollution. Once a mandate for health insurance is required by law these are the organizations and individuals which will suffer from rising costs for care.
Perhaps it is defensible to penalize individuals for the results that arise from making choices on their own, such as living in a region with a high cost of living, continuing to smoke tobacco products, becoming obese by choice rather than having a particular genetic makeup, etc. Premium discrimination with respect age is also defensible because we must all go through that same sequence of ages, just at different times.
But the litany of discriminations described above is not defensible: an individual does not choose and cannot alter the history of a previous bout with cancer, or a chronic condition; no one can move away from his or her genes or evade the responsibility to care for a sick child. These are the kinds of problems which the entire system of insurers has a responsibility to address.
There are economic as well as a social costs to consider. By sculpting separate pools, insurers who successfully practice pool pollution relieve themselves of a great deal of their own internal pressure to cut their costs. For they have negatively affected the ability of their competitors to compete on price. The effects of this problem compound.
It also reduces an insurers need to apply pressure toward its medical care suppliers to cut their own prices. The insurer often finds it to be even advantageous to reward its suppliers instead, It helps to create a stronger network, so it is justifiable as an investment.
Ominously, this reduction in pricing pressure reverberates in a vicious cycle. Some suppliers receive more pay for less work when they preferentially serve the individuals from insurers with healthier pools. They will seek to work as much as possible from those pools and publish higher prices for serving the public at large. That constitutes extra work they no longer require in order to prosper.
It is the external, higher price which becomes public knowledge; the contracted price is privately held. This raises the average of regional prices whose statistics are gathered by organizations like Medicare for use in rationalize prices for procedures. This fallacy feeds into the vicious cycle and establishes an unchecked positive feedback loop connecting the provider and the insurer. That collaboration thrives in our country and plays itself out like a game of ping-pong.
These kinds of problems are hard to address by our current array of insurance providers. It is the type of problem that automatically disappears in a single payer system because one of the players in the loop, the single payer, cannot be rolled.
The first step toward reorganizing our multi-player system of health insurers into one that can attack the inequities cited above is to change its behavior so as to mimic that of a single payer. This can result from transforming the existing loosely connected system of independent, fully competing parts into a strong network of coherent, semi-competing participants.
The Broad Outline of A Solution:
The prime directive of health care is to cure. If private insurers are to be part of the health care industry they must behave appropriately. Their own prime directive must also be to cure, by putting profits second and health care first. Since they have already proven that, left to themselves, they cannot meet that responsibility, the role of the government must be brought into play. There are three ways this can happen:
- push the private insurers aside and create a new agency of government do the entire job right,
- write laws with enormous penalties, to constrain private insurers to do their job in an acceptable manner,
- find some reasonable combination of these two polar opposites.
As a country, we seem to have already chosen the third option, mostly because of our unique history. But we seem to be stumped, struggling with the consequences of each decision we have examined. Certain interests seem to suffer inordinately, no matter how we have thought to proceed. And all the combinations we have considered so far seem to have favored the insurers over the individuals or the other buyers acting in their behalf.
The remainder of this diary describes an American Pool Equalization and Reinsurance Agency, (APERA), designed to provide the advantages that a single payer health care insurance system would produce, but leave the existing set of private insurers intact.
APERA will register all primary healthcare insurers who wish to sell basic and/or supplementary plans that are built upon them. It will also collect and organize a comprehensive database of all the insurance records for all the individuals in each insurer's pool. Later on, when insurance records are under control, it will also organize a database of actual medical records for each individual and each provider.
From that database APERA will be in a unique position to standardize all forms of medical records and related information across all components of the American healthcare enterprise. It can also carry out the outcomes research mandated for the Independent Medical Advisory Council, IMAC, which should probably be folded into APERA itself, to be managed as another of its major responsibilities. That data, that research and APERA's close relations with all primary insurers can provide an efficient pathway for moving knowledge from theory to practice.
APERA can also utilize its databases to process reinsurance claims made against it by the primary insurers. It can thereby oversee the decisions that insurers have in order to adjust such claims if the primary insurers can be shown to have made improper decisions or allowed duplicate test procedures, committed fraud or improperly affected the practice of medicine. The primary insurers will always be free to process their primary claims as they see fit but not all of their activities and decisions will be guaranteed as reimbursable. Some reimbursements to the primary insurer may be denied after the fact because of this oversight.
APERA will manage and coordinate the existing private insurance system with a goal toward lowering the high barriers which discourage additional insurers, whether private, not-for-profit or coops, to enter the health insurance network. Once the damaging activities now practiced by private insurers are channeled toward more productive behaviors, the door can be opened wide to welcome other kinds and increased numbers of new insurers. This neither disallows nor requires a public option, either at the state or federal level, or both. But it can easily accommodate them should they ever come to exist.
The resulting system will be transformed into a symbiosis that induces all of its many participants to interact cohesively toward mutually beneficial goals. All primary insurance entities will be channeled in such a fashion that their prime function becomes one of administering basic health care rather than operating as loose cannons: as separate, disorganized, profit driven, independent makers of policy. They can still make a profit but the size of their profits will increase more by their becoming efficient administrators than by their becoming brutal. Trying to find profits based upon denial of care will become an unproductive activity and a waste of their time.
APERA's activities aimed at coordinating private insurers also protects the latter from laws that punish businesses that act in restraint of trade. For if private insurers attempted to coordinate themselves in this manner on their own, those activities could be deemed illegal.
APERA will define, but not offer for sale, a small number of alternative sets of basic healthcare provisions packaged into rational plans for individuals with different needs. They will become the national standards, one of which must be included in every basic policy sold and every supplemental policy meant to augment one of those basic levels of care.
All supplementary plans must reference one of those standard basic level care packages. All quotations describing premiums must include separate prices for the basic care portion and the supplementary care portion. The customer can buy those two pieces at once or separately, from the same or from different insurers. An individual who already owns a basic policy can buy just a supplement that matches it, even from a different insurer.
Protecting the Rights Of Americans:
Congress must give APERA its inherent power by creating laws that enforce the basic rights of individuals and group managers, such as employers, who buy insurance for their own, larger collection of individuals. It must also enforce the rights of the primary insurers themselves. Here we discuss the rights of individuals and/or purchasers acting in behalf of their groups.
The primary right for all Americans seeking Health Care insurance is to be included in the same large pool as every other American, regardless of one's current state of health, genetic makeup or previous medical history. We hold that truth to be self evident.
Unfortunately, because of historical practices in these United States, the overall pool has already been sliced and diced, subdivided, manipulated and distorted into unequal sub-pools to such a great extent that it will require a rather long period of time to unravel all of this without causing chaos. Therefore, in this proposal it is suggested that the unraveling and reconstitution of all current sub-pools be divided into two phases, each to be carried out consecutively over a five year duration.
During the first five years there should be a deliberate, steady transition toward the subgoal of managing all basic health care policies along one or the other of two separate paths, according to the particular types of pools:
The Grouped Pool: those individuals whose policies are purchased and more than 50% paid for by a corporation, small business or other defined group for the benefit of its employees or membership,
The individual (Non-Grouped) Pool: those who purchase their own health insurance for themselves or for their family.
Over a second five years, the distinction between the grouped and non-grouped pools should also be eliminated, again by means of a deliberate, steady transition.
Each primary insurer will eventually be required to charge equivalent basic health care premiums for each individual it serves regardless of who purchases it and how it is purchased. Here the word “equivalent” is meant to cover individuals within the same age group and locality. That is to say that the overall pool will be subdivided only along those two dimensions, age and locality. (Differences between family and individual plans are probably necessary but will not be discussed here: perhaps in a refinement to this proposal).
The inequities that this creates between insurers will be gradually ameliorated by APERA over a period of five to ten years. Procedures will be phased in to prevent chaos during the first year or two. After the end of these transition periods of time the following rights of individuals and employers/group purchasers will have beed secured:
The right of all individuals to apply for any insurer's basic plan and have their applications accepted on the same terms that the insurer sells it to every other American. That is, each primary insurer will charge every individual the same premium, regardless of the individual's current or previous state of health or the historical rate of consumption of basic health care dollars. Premiums can differ, within limits, but only for age and locale.
The right of any individual to buy either the complete plan offered by an insurer or just the basic health care portion of that plan. That is, if a primary insurer sells insurance beyond the basic care level, it must identify and charge separately for those provisions that are included in the basic levels of care. The basic levels of care will be defined by the Federal Government and guaranteed to be uniform throughout the country. The insurer can offer any supplementary care provisions it wants, and charge separately whatever it wants for those supplements.
The right of each individual to remain covered forever. So long premiums are paid and the policy in question continues to be sold by the the primary insurer, this right applies to group based plans as well as individually purchased plans. In other words, COBRA rights can be extended forever, if desired.
Any employer or group organizer can apply to cover it's own employees or group under the same provisions that any primary insurer offers to another such employer in the same locale. The insurance provider cannot deny such an application. The Federal Reinsurance Agency will be responsible for managing and smoothing out this procedural right over the first five year transition period. No primary insurer will be required to expand staff to accommodate such applications at a rate greater than 10 percent per year, nor to incur additional financial insurance liabilities at a rate greater than 15% per year.
The right of each individual to remain employed regardless of financial considerations related to their health care will be assured. Insurers will not be allowed to adjust premiums to employers on the basis of particular individuals who are included in a company's employee pool; therefore premium costs for individual employees will no longer be another burden for the employer to consider. (Age will remain a problem in this regard so further thought is needed here.)
The rationale for opening up employee based insurance plans to small businesses within the same geographic area is that the employee based plans, as they are presently constituted, are probably the most effective manner by which insurers conduct their cherry picking activities and carry them out for the purpose of pool manipulation/pollution. Such practices distort the economics of health care by increasing the cost to other individuals whose employers do not offer health insurance of have to offer it at exorbitant cost. This kind of distortion will continue if small businesses are forever forbidden to piggy-back onto the best deals that insurers in their area have already offered for sale. But once the pool profiles that each insurer sees will have been "equalized" with respect to each other, there will no longer be any pressure to deny this piggy-backing right.
The second transition period, between the fifth to the tenth year, will assure that employee based and individual based insurance policies shall become completely equivalent. The distinctions between the individual and group pools will cease to exist. All Americans will effectively belong to the same pool, which, by the way, is the main benefit of a single payer system.
Protecting the Rights of Corporations:
This section considers American health care from the point of view of the insurers. Providing for the above described rights of individuals will create severe difficulties for insurers. This is because they compete within a pool that operates as a zero sum game. Once individuals and small businesses are given full control over the their right to purchase any policies offered to others the insurers will lose all control over the average intrinsic health of the pool of individuals they must serve. This is what society wants; but this is also untenable for private insurers to provide unless it can be provided within the effective confines of a single payer system.
Therefore the most important thrust of this discussion is to describe a system that manages the activities of a multi payer private insurance system in such a way that the multiple payers can operate as though they were merely separate departments of an overall insurance organization. They will still be able to compete with each other to maximize profit, but the only way left for profiting under such competition is to maximize their own cost effectiveness, efficiency and their creative contributions to the overall health of the nation. It may even be argued that the kinds of competition that is still allowed will turn out to produce a system that is even better than single payer system can provide. For competition among its “departments” does not exist in any of the conventional single payer schemes that currently exist. Because they do not organize themselves into departments that compete.
Therefore, insurance providers deserve and this system should provide:
The right to an equitable share of individuals with preexisting conditions.
The right to an equitable share of individuals who need health care requiring catastrophic cost.
The right to an equitable share of the burdens of insuring the large number of uninsured individuals, mandated to obtain health care insurance.
The right to protection against business disruptions. This will be important over the ten year period of time it takes for this proposed transition to completely take effect.
APERA: The American Pool Equalization and Reinsurance Agency and how it can function:
This section will describe a scheme which organizes a network of insurers in order to protect the rights of individuals to have access to fair and effective health care while also protecting the rights of the primary insurers who provide that access within the network. It is based upon the idea of reinsurance. The purpose of this reinsurance will be to protect the primary insurers against hardships that might result from declaring and enforcing the rights of individuals seeking basic health care.
With appropriate new laws APERA can also transform the entire health care system into a more cost effective version of its former self. This could actually be much more effective than what presently we expect to achieve with the use of a strong public option, competing within the present mix of insurance providers.
Re-insurance is a form of insurance that is sold to primary insurers in order to protect them against well defined hazards: hazards that can be extremely costly should they occur but which are expected to occur only with very low probability during any particular year. A re-insurance company sells such re-insurance policies only to primary insurers.
It would not be a surprise to find that the private insurers presently in the health care system will try to make use of private reinsurance companies and attempt to purchase it from them once congress mandates them to serve individuals with preexisting conditions or to continue serving who experience a sudden need for expensive chronic care or need care with catastrophic costs. It probably will also attempt to use private reinsurance if congress disallows the practice of canceling insurance after a policy holder's lifetime limits for total benefits have been exceeded.
If private reinsurance companies are allowed to dominate this reinsurance market as well, we will simply experience pool manipulation at an even higher perch: at the reinsurance level. The reinsurers will also cherry-pick among the primary insurers. Or they will charge premiums at different rates. We will suffer under that just like we suffer under the system we have now. Except that this amplifies the injustices.
More importantly, the ability of a single payer reinsurance agency to manage the behavior of primary insurance providers toward the public good will also have been lost. Reinsurance will also become multi payer. It will become impossible to provide coherency among the primary insurers, which is the major reason for adopting the reforms described in this proposal.
The APERA alternative will take the form of an agency modeled after the Federal Reserve, especially with respect to its independence from political pressures of all kinds. This agency must manage the risks to insurers and level each insurer's “playing field” with respect to all other primary insurers. The goal is to cause all primary insurers to behave without monetary penalty as though their own sub-pools of the entire American pool were each of the same health quality even though they likely are not of that same quality. APERA will compensate them for those actual differences.
The Basic Products of the APERA:
The APERA will sell a re-insurance product to primary insurers for protection from the the following hazards:
Reinsuring for catastrophic levels of care. APERA will set premiums, consistent for each region and age, for reimbursing the primary insurer whenever one or more of the individuals it covers require healthcare costs that exceed a defined deductible amount, called the "reinsurance deductible" or simply the "deductible". The premium paid for that reinsurance will depend upon the region, the age of the individual and the insurer's choice for the deductible. The reimbursement to the primary insurer is the amount of valid costs that exceeds each such individual's reinsurance deductible.
The deductible will be quoted in units representing a multiple of an individual's premiums, as charged by the primary insurer during that quarter. Reinsurance premiums are charged for every individual covered by the primary insurer in each of its healthcare plans. If an insurer wants the deductible amount to be 10 times total premiums, for example, the resulting reinsurance premium will be rather low because the great majority of individuals in any random sub-pool will not exceed such a high level of cost for medical care. If a deductible multiple of 2 times total premiums is chosen a much higher reinsurance premium would be charged, per individual, because more individuals in the primary insurer's sub-pool are likely to experience health care costs that exceed twice the premium for that quarter.
The primary insurer cannot subdivide its overall policy plan sub-pool into separate, smaller pools. If the primary insurer wishes any individual to be covered at a low deductible, say twice the premium for each individual, than every other individual in the same plan's sub-pool will have to be reinsured for catastrophic levels of care using the same multiple.
Reinsuring for preexisting conditions This premium will depend upon the number of quarters of insurance data that exist for each newly insured individual who enters the sub-pool of a primary insurer's basic health care plan. During its first quarter of APERA's operations new individuals will have no information at all stored within APERA's database. Therefore 80 percent of the primary premiums collected will be forwarded to APERA and APERA will bear 80 percent of the total insurance risk for that individual. The primary insurer assumes the remaining 20 percent of the risk.
During the next quarter 60 percent of the premiums and risk for new individuals will be covered by APERA and 40 percent by the primary insurer. After the fourth quarter there should be a complete year of data for most individuals, so all subsequent insurance risks will be carried by the primary insurer, who will also retain the entire premium. The primary insurer will service all its new individual's claims in the same manner it services them for other individuals.
After four quarters of data are collected the primary insurer of that individual no longer participates in this kind of reinsurance risk for that individual. However the catastrophic care reinsurance risks, (described above), and the pool equalization procedures, (described below), are still available for all primary insurers.
Pool Equalization Protocols: Pool equalization procedures represent a dramatic change to the manner in which primary insurers will operate; therefore it will be phased in gradually over five years. In general, APERA will collect from each insurer a given portion of all premiums charged and redistribute appropriate portions of that money back to that to the primary insurers according to the average health history of all individuals that insurer covers. So if a particular basic plan sold by an insurance company, A, happens to cover individuals whose health care is statistically more costly than the average, taken across the country, company A will be reimbursed with the actuarially proper amount of premium dollars that it deserves. This will be more than was originally placed into APERA's equalization pool.
If Company B maintains insurance for individuals whose average claims for healthcare are smaller than the national average, (indicating that Company B probably practiced pool manipulation to organize such healthy individuals into its sup-pool, some time in the past), the actuarially proper reimbursement for pool equalization will be smaller than the amount which was put at risk for pool equalization. The total equalization refunds and assessments should balance each other for every quarter. APERA does not take a cut out of this redistribution.
Phasing in this protocol will be accomplished as follows: During the first year no redistribution will occur, but data will be collected. During the second year 10% of total primary insurance premiums will be put at risk and that amount will be redistributed. During each successive year an additional 10% of premiums will be put at risk and redistributed until the maximum amount, probably 50%, possibly as high as 70%, has been put at risk for redistribution.
After this phase-in is complete, the combination of reinsurance for catastrophic care, for preexisting conditions and for pool equalization will have made it rather unrewarding for any primary insurer to engage its resources in activities that attempt to further pollute the entire American healthcare pool.
Protection from a sudden rush of small businesses applying to piggy-back onto any particular group plan: No insurance provider shall be forced to increase its servicing capacity by more than an additional two and one half percent per quarter, (ten percent per year). APERA will sort all new piggy-back applications on a first come first serve basis and reassign the excess servicing requirements for the excess of those applicants to other primary insurers, until that quarter arrives wherein the target primary insurer can accommodate them.
The financial risk or gain associated with this piggy-back program will increase for target primary insurer at twice that rate. That means no more than a maximum increment of 5% per quarter, 20% per year, financial insurance risk must be accepted, even though some of the servicing of that risk is done by another company. Beyond that excess financial risk of 5% per quarter, APERA will assume the entire financial risk according to the policy terms set out by the target insurer. All such reassigned applicants will retain their positions in the first come first serve list unless they voluntarily move into the pool of a different primary insurer. And the target insurer will be allowed to increase its premium rates once per quarter in order to adjust separately for these new applicants.
Individuals buying non group policies can also piggy-back onto any other non group insurance policy that is sold within the individual's region. The same rules will apply during the first five years of the phase-in transition. But a level of piggy-backing that exceeds 2.5% per quarter is not so likely to happen for individual plans.
During the second five year phase in period individuals can also piggy-back from their individual plans onto what used to be group plans only. The distinction between group andindividual plans will disappear, but the piggy-backing will be managed in a similar way.
To be clear, all the reinsurance procedures described above apply for basic level of care policies that are sold anywhere in the United States or its possessions. These procedures do not cover supplementary plans at all.
APERA can use these procedures to facilitate the entry of new insurers by offer catastrophic care reinsurance policies with very low deductibles, smaller than allowable for established insurers deductibles for start ups can be as low as 1 times premiums or even 0.5 times premiums. In effect APERA takes on most of the financial risks of the startups until they are firmly established and have adequate reserves. A start up can thus safely devote the bulk of its energies toward learning how to administer policies and let APERA reinsurance protect its finance risks. In return APERA receives a large portion of the total premiums charged to each individual and this ability of a start up to get reinsurance at such deductibles will disappear gradually over three to five years.
Final thoughts:
APERA will cover its staff and overhead expenses by charging no more than 0.5% of the premiums collected by all primary insurers it registers and serves. This limit is more than enough to cover all APERA staff expenses because APERA examines only a very small fraction of the primary insurance claims that are processed each year. It only considers those claims for individuals whose reinsurance deductibles have been exceeded.
For those, APERA need only check for fraud and for excessive primary level insurance reimbursements that may have occurred. For example, there may have been a repetition of the same MRI for two different doctors within an unreasonably short period of time. Perhaps because the primary care doctor ordered one and a specialist to whom the patient has been referred reordered the same test. The primary insurer will not be reimbursed for those wasted costs even if the deductible has been exceeded.
It is the responsibility of the primary insurer to coordinate and regulate health care procedures across its own network so that such things do not happen. This form of pressure is one that APERA can exert and also one that is missing from the manner in which we presently administer health care. Our autonomous private insurers do not feel this kind of pressure. But they should. Organizing them into a network, as this proposal suggests, is exactly the kind of vehicle needed to apply that pressure.
The overhead charges that APERA collects from the primary insurers can also fund its medical advisory boards, perhaps IMAC itself. Several years after APERA starts operations, outcomes research will start producing actionable results. APERA can enforce those conclusions in the same manner; in the course of auditing claims for reimbursement. After enough of these reimbursements are denied the private insurer will change its practises.
APERA can also conduct random audits of other primary insurance records, because all such records will be stored in APERA's database. This might be done for purposes of reaching outcomes research conclusions, or testing them more broadly, against a larger historical record. It may also be done in order to assess the behavior of all organizations that belong to the network. APERA can then suggest changes that improve outcomes or create efficiencies; then it can disseminate such information throughout the medical establishment.
It is possible, should congress agree, for APERA to assess every primary insurer an additional defined percentage of all premiums collected. This would be used to cover the supplements to be awarded to low income individuals who will be mandated to buy insurance beyond the price levels that they can actually afford. It is estimated that this will cost less than one trillion dollars over ten years and all but 300 billion of that will be gotten through identified efficiencies.
That amounts to $30 billion per year out of a total national health care cost of $2.5 trillion per year. Suppose 60% of that amount passes through primary insurance companies, or $1.5 trillion per year. That means a 2% assessment of all premiums would collect the necessary amount, $30 billion per year, and APERA can merely redistribute that to cover the supplements for each insurer who insures low income individuals mandated to acquire insurance.
Perhaps this assessment can be lowered if the providers that earn the remaining 40% of all health care expenses can also be assessed by APERA. But most of this money already passes through the premiums charged by primary insurers in another way. The health care providers have been overcharging insurers in order to cover the extra overhead expenses they incur for providing free care to the uninsured. The insurers have passed this on to the public in the form of extra premiums. Under this new plan, insurers will eventually be charged less, but instead of passing on those savings to the individuals insured it passes it on to AREPA, which uses it to organize better care for the uninsured poor. Total costs should decrease after reach a new equilibrium.
There still remains the question of how this assessment will be scored in congress. Is it really a tax on insurers? Or is it merely a rerouting of health care money which presently passes through the insurance companies to pay the medical providers' extra overhead for treating the uninsured. The second argument makes sense. A bill that sets up this mechanism to cover the supplements to the uninsured should be scored revenue neutral.
There is one final issue to consider. And perhaps this is the most controversial issue yet. Other countries which rely upon private insurers for health care require that a given fraction of health care premiums must be spent on health providers. Germany, for example, requires 97% of all premiums to be spent on medical care and the insurer can only retain 3% for all of its operations and profits. (Note: this does not mean that German insurance firms are limited to a level of profits that is less than a three percent, before taxes. Premium money is not the base upon which profit margins are computed: that money just passes through. The real base for computing the profit margin is computed from other items, like operating expenses and invested capital. Insurers can still achieve 20% profit margins if they use their staff and their invested capital efficiently.)
APERA can enforce a gradual lowering of the present insurance takeaway from the premiums they collect. That take is as high as 20% for some of our primary insurers. APERA can gradually increase the minimum percentage of premiums that must be spent on medical care, and enforce that limit by withholding reinsurance disbursements until such requirements have been met. It should be possible to bring this figure of merit to a value of about 95% over the course of ten years. Insurers can reduce the great bulk of the money they spend for staff who used to do the research that leads to pool manipulation, rescission of policies and denial of care. All of these activities will become either non productive or outrightly illegal.
Outcomes research, standardizations and computerized record keeping that will be coming out of APERA can streamline what is done by the remaining staff. Only after these efficiencies have been maximized will it be necessary for primary insurers to stop paying billions toward their executives' bonuses and forgo the awarding of their golden parachutes.
The end result is that all insurers, private or not, will be paid for the job they are best equipped to do: running computer programs that pay, deny or adjust claims, and oversee the decisions that their computers have made. If their computers make too many mistakes they will call in their programmers to analyze their programs and correct them. If they are especially good at their jobs they will organize meetings designed to transfer information back and forth between the decision makers within their medical provider network, (mostly doctors), and the outcomes research scientists who work for AREPA.