Maybe self-insurers can lead the way

There are times I get pessimistic about health care reform. Policymakers pay lip service to the unsustainable spending in the health care sector, but seem unable to do anything about it. Private insurers know that they could make decisions politicians find unpalatable, but they have yet been unable to stem the tide of rising costs. So who can do anything?

Maybe the self-insurers can lead the way.

When a company gets large enough, it often makes financial sense for them to insure their workers themselves. With a large enough risk pool, they can actually pile money together and pay for the health care of their employees themselves. Without any of the underwriting and administrative costs of a private insurance company (including profits), they can run as lean and as efficient an insurance program as they like. Sometimes, they outsource some of the administrative work to a private insurance company, but they pay just a percentage for that, and overhead is still relatively low.

This is intriguing, because in its own way, this is like running a small, fully contained single-payer system. The company is completely invested in keeping costs down. If they manage to do so, all the savings stay in the company. Not only that, but they can tie reductions in health care costs directly into reduced premiums (and increased wages) for their workers.

I was talking to a group of them yesterday, and I was pleasantly surprised at how nimble and innovative they were. Because they see the improved outcomes and potential savings of prevention and wellness in their own risk pool, they are willing to engage in programs that were, quite frankly, far and above what I’ve seen from traditional private insurance. They were also willing to look at social factors and determinants of health to see if they could bring down spending in ways I can’t imagine the government or standard insurance doing. When I talked to them, I tried to stress how they could push harder for value-based insurance, engaging their employees to see that preferentially paying for more cost-effective therapies could save everyone money, while not sacrificing quality. I think many of them might even try it.

We keep hearing how states can be perfect laboratories for health care reform. I’ve been skeptical of that, because although there are exceptions, I haven’t seen many successes. But I think that self-insuring companies may be the laboratories we’ve been looking for. If they can make it work, perhaps that could spread to private insurance in general. To be honest, I’m feeling more optimistic about this than anything reform-related in some time.

UPDATE: Additional thoughts here.

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