Tuesday, November 3, 2009

Actuaries Project Substantial Capital to Fund Health Insurance Co-ops or Public Option

Little difference in start-up capital found between co-ops and public plan option

WASHINGTON, Nov. 2 /PRNewswire-USNewswire/ -- A group of nonpartisan experts said that the necessary start-up capital for either health insurance co-operatives or a public plan option may be substantial and could vary greatly. Under modeled scenarios, actuaries projected that start-up capital requirements ranged from approximately $1.7 billion to $45.6 billion. The projections are intended to inform policymakers about the costs of implementing either co-operatives or a public plan option, which are proposed in health care reform legislation currently under congressional consideration.

During a webcast for congressional staff and media hosted by the American Academy of Actuaries, the actuaries said that the wide range in projected start-up capital is attributable to three unknowns--how many people enroll, the difference between pricing assumptions and actual claims, and average claims. Overall little variance in capital requirements was found between co-operatives and the public plan option.

The findings were published in a technical report prepared by a joint work group of the American Academy of Actuaries and the Society of Actuaries. The work group developed a new model that projects, under a variety of scenarios, required start-up capital including the amount of capital needed to meet health plan solvency standards. The complete report is available here:

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