A Way to Fairly Issue a Federal Health Insurance Plan






John Sealy Hospital

Galveston, Texas




The male members of my family were in the life insurance industry for at least two generations before me.  My daddy was an senior executive and director  of a major life and health insurance company for just shy of fifty years.

Under a nom de plume, he wrote a couple of college textbooks on life and health insurance  that were still being used and updated long after he died in 1980.

My daddy's father was a college professor who was also the manager of a life insurance branch office in Shreveport.  And two of his sons, older than my daddy, were among the agents in that office.

After I completed my college education, I decided to study in the Chartered Life Underwriters program, primarily to really learn the philosophy and inter-workings of insurance underwriting.

I did not get the CLU designation because, since I was not an employee or an agent with an insurance company, I wasn't eligible.

But I did complete the educational requisites for the designation. There are eight courses, taught by college professors, and it took me about four years to complete the requirements.


So I know a lot about insurance





Here are the fundamentals that totally govern why we have insurance and how it works in the commercial marketplace.


The purpose of insurance is to share the loss that arbitrarily happens to the persons who are the unlucky ones among us who "slip on the banana peel."


You can't be a member if you or others already know that you will be or are likely to be the one to slip on the banana peel.


The more people who are in the insurance group, the more predictable the percentage of those who will file loss claims will be, and the more predictable the gross amount of the claims to the insurance underwriter over a set period of time will be as a result.


The biggest risk to insurance companies is inadvertently writing some policies to those who misrepresent themselves, whether on purpose or inadvertently. 


For an example life insurance companies will not pay a claim to someone who commits suicide until at least two years have passed from the time the policy was issued.


That exception is written in the application and the policy itself. Rightly or wrongly, the insurance company figures that someone who commits suicide early in the policy's history, was planning to do it at the time he bought the policy.


The same is true with a deadly disease, or that a person applying for the insurance coverage lives in a crime ridden neighborhood or likes to parachute.


You get the idea.




Ironically, if everyone in the US had to purchase a particular insurance policy, and the underwriter had to issue that policy to everyone, the actuaries could determine how much would be paid in claims each year; and, therefore, the amount the level premium would have to be for each participant, regardless of his individual risk to the underwriter.

Further, the premium could be adjusted, say, every year to represent the actual experience of claims of the previous year.





So suppose the US decided that everyone in the US must be insured against health issues, through a government program.  There would be no exceptions, no discounts for having an exceptional pretty face or that you were a senator or House of Representative member or the president.

And those premiums for everyone would be assessed and collected through, say, the annual federal income tax, just like Social Security is.


Health insurance companies could participate by being members of a "reinsurance group." They would purchase from the government a percentage of the whole.  They would then be taking part of the risk, but they would be taking a like part of the profits.


Health insurance for all would be substantially cheaper and more fair for everyone than any other plan.




The different proposed plans as well as the existing Affordable Health Care coverage primarily can't be cheap and can't properly work because those covered are not all inclusive.

While I can't imagine this to be true, neverthess, it appears as though no professional insurance actuaries where ever consulted.  The rules were just made up as the government people went along.



Since 1966


214 503-8563


*My educational credentials are available on my web site.  Click here.

Comment balloon 3 commentsBILL CHERRY • July 25 2017 09:20PM
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