Highlights for ACA Reinsurance Fix

Below is a process flow diagram of major components that impact ACA reinsurance. It contains three columns representing health claims process [1] before ACA, [2] the current ACA process, and [3] ACA with government Reinsurance.

Initially, the process is identical for all three, but it diverges when handling “excess” costs as shown by the three red bordered boxes. Shifting those excess costs to government as reinsurance dramatically drives down total costs for both insurers and users. The two boxes at top right add the effect of lower health care costs on government subsidies to arrive at the combined net savings from users and government.

This process diagram is a picture of an Excel spreadsheet in which one can change the assumptions in yellow highlighted cells.

Open Process Flow Diagram: ACA Flow Diagram

Download Interactive Spreadsheet: ACA Process Flow

The above diagram captures most of the effects of government reinsurance. An even more comprehensive analysis is provided in the Post titled:

Exchange Fix Stabilizes and Restores “Affordable” to Affordable Care Act

Both posts identify the multiple effects when government reinsurance is reinstated for ACA Exchanges. Both analyses show that government reinsurance when implemented:

  1. Can decrease health insurance costs by 40% or more for small businesses, key generators of jobs in the U.S.
  2. Is equivalent to a $25 Billion middle class tax break for Exchange members (difference between member savings and net new government spending)
  3. Clearly defines maximum risk for insurers, abolishing the costs of unlimited risk, leading to far lower premiums
  4. Increases competition and user choice as health insurers have positive incentives to participate in Exchanges
  5. Provides health insurers with a large built-in market to up-sell additional products and services
  6. Continues reliance on private health insurers to come up with creative solutions for cost containment and reduction

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