Establishing an Analytical Framework for Measuring the Role of Reinsurance in the Health Insurance Market. C. Variables for Understanding the Role of Reinsurance

03/20/1997

In this section, we look at the types of information about reinsurance arrangements in the three markets that would help researchers and others better understand the roles that reinsurance plays and the level of risk that is transferred to reinsurers in each of the markets.

As discussed above, because of the lack of reliable information about reinsurance arrangements, particularly for the indemnity insurance and self-funded employer markets, our discussion of key variables for analysis must generally be conducted on a theoretical level. For the HMO reinsurance market, where some useful information is available, we can better relate our discussion of key variables to available data.

The type of information about reinsurance arrangements that we may wish to know for each of these markets will vary to some extent with the policy issues we are trying to address. For example, the scope of work for this project developed by ASPE staff suggested that the issues of interest for the indemnity market relate to market concentration and whether smaller insurers were acting principally as retailers or as primary risk takers. One of the issues of interest for the self-funded employer market relates to the use of stoploss coverage by smaller employers and the potential that stoploss is being used to evade state insurance laws.

Another factor that will be relevant to identifying key variables for understanding reinsurance roles in a market is the number of different types of reinsurance arrangements used in a market. If reinsurance is used for a variety of purposes in a market, identifying variables that elucidate and differentiate each of those roles could be problematic. This is a potential issue for the indemnity insurance market, where the use of reinsurance may be influenced by a number of different strategic or financial factors.

Below we identify key analytic variables for each of the three markets.