States, by offering reinsurance - essentially insurance for insurance companies - can make it possible for lower cost insurance to be offered to small groups or to individuals, according to a Commonwealth Fund report.
Small groups can pose great risks to insurers. Therefore, small group and individual medical insurance often is more expensive than large group insurance. States, through reinsurance, can spread those risks - making them easier for insurers to handle.
According to Harvard School of Public Health Professor Katherine Swartz., the author of the report, Reinsurance: How States Can Make Health Coverage More Affordable for Employers and Workers, New York and Arizona already have adopted reinsurance programs.
Her report aims to inform readers about the mechanics of reinsurance, the experience these two states have had with their programs, and issues states should consider before implementing reinsurance programs.