Book Review

Reinsuring Health: Why More Middle-Class People Are Uninsured and What Government Can Do

N Engl J Med 2007; 356:315-316January 18, 2007

Article

Reinsuring Health: Why More Middle-Class People Are Uninsured and What Government Can Do
By Katherine Swartz. 203 pp. New York, Russell Sage Foundation, 2006. $24.95. ISBN: 978-0-87154-787-3

Most of us know someone like Paul (a pseudonym). He has a master's degree in computer science and works as a contract employee for a large software company. He has a good job and earns a decent salary. But like many other college-educated, full-time working Americans — such as sports broadcasters, university adjunct faculty, and technical writers — Paul doesn't have health insurance. Using engaging descriptions of individual situations, including Paul's, and careful analysis of data, Katherine Swartz draws attention to the problematic and growing prevalence of the uninsured in the middle class. The centerpiece of her book is a promising response to this important problem.

Middle-class people without health insurance tend to be employed by small firms or self-employed (often working for larger firms under contract). They can obtain coverage only through the individual or small-group health insurance markets. If they are healthy, they find that coverage is much costlier than seems warranted by their circumstances. If they are not perfectly healthy, they may not be able to obtain coverage at all, or they may be able to obtain only limited insurance at a very high cost.

Swartz pinpoints the source of these related outcomes in the skewed distribution of health care costs. Just 10% of the insured population accounts for about 70% of all health care expenditures. People who expect to incur high costs are disproportionately likely to seek coverage in the individual and small-group markets. Insurers, conversely, devote considerable resources to the effort of avoiding these people. They charge premiums that reflect these selection costs and the expected costs of the unhealthy people they will nonetheless enroll.

Access to individual and small-group insurance would be easier and less costly if these high-cost cases could be pulled out of the market. The best way to accomplish that, Swartz argues, is through a system of government “reinsurance,” through which a public program would reimburse insurers for a share of the costs of unusually expensive cases. The idea is not at all bizarre — government reinsurance already exists in the flood insurance and mortgage insurance markets, and a similar arrangement has existed in New York State for several years. Presidents Dwight D. Eisenhower and Jimmy Carter proposed variants of health reinsurance, as did Senator John Kerry in his presidential campaign. Moreover, the universal health insurance systems of the Netherlands, Germany, Israel, and Switzerland (and perhaps other countries) incorporate similar arrangements.

The idea of health reinsurance occupies the nearly empty middle ground between those who believe that markets work well in health care and those who believe that they do not work at all. Health reinsurance would not alter the relationships between patients and providers, between providers and insurers, or even, for the most part, between purchasers of coverage and insurers. By tinkering with the market, it might, however, make it easier for some middle-class Americans to obtain health insurance coverage — and the health care and financial protection that insurance brings. Swartz's accessible, jargon-free book offers policymakers and those concerned about health insurance a new direction forward.

Sherry Glied, Ph.D.
Mailman School of Public Health of Columbia University, New York, NY 10032
sag1@columbia.edu