Capitalist Health Insurance for All

Here’s what corporations know, but don’t want you to find out: Private insurance is for suckers.

Armies of healthcare industry flacks, lobbyists and bought-and-paid-for legislators rant that nonprofit, public insurance is a slippery slope to socialist hell, will limit your choice of physicians to Doc Watson and Dr. Kevorkian, and bankrupt the country. But, in fact, most U.S. Fortune 500 companies wouldn’t touch private insurance with a 10-foot colonoscope.

When they need to insure their financial health against fire, terrorism, and liability lawsuits sparked by defective products and polluting factories that kill people, they don’t call State Farm. Instead, corporations routinely insure themselves by creating a ​“captive” insurance company as a wholly-owned subsidiary. ​“The parent company is insuring its own risk,” says Sandy Bigglestone, of Vermont’s Captive Insurance division.

But when we the people need health insurance against the high cost of staying alive, we, or our employers, pay private insurers – corporations that are more devoted to protecting their profits than our health. The premiums we pay go not only for our pills and treatments, but also for lobbyists (on whom the health insurance industry currently spends $1.4 million per day for the U.S. Congress alone), campaign contributions, stratospheric executive salaries, private jets, lawyers hired to fight legitimate claims, and, of course, profits.

Captive insurance cuts costs, first, by saving all the money an outside private insurer would take as profit. How much? When it comes to health insurance companies, it’s very hard to know. That is why Sen. Jay Rockefeller (D-W.V.) has demanded that the top health insurers reveal what portion of premiums goes to profits versus patient care. But whatever the figure, the profits are big and getting bigger. 

By various reports, at 10 of the country’s largest publicly traded health insurance companies, profits rose 428 percent from 2000 to 2007 – from $2.4 to $12.9 billion. Helping fund that jump were our premiums, which rose from 1.5 percent of G.D.P. in 1970 to 5.5 percent in 2007. The average family with employer-sponsored insurance now pays twice what it did in 1999, according to the Kaiser Family Foundation.

Captives also save administrative costs, since they have ​“an incentive to do business efficiently” because ​“it’s eventually coming out of the same pockets,” Dennis Harwick, president of the Captive Insurance Companies Association, told the Atlanta Journal-Constitution. On top of that, captive insurance companies rake in tax breaks by deducting from their profits the money they are required to reserve for payout­­ – even if they never have to pay it out.

“What!” you say. ​“By using captives, parent companies undercut the free enterprise system and deprive businesses of the right to compete in the market. That sounds like socialism!” – except that when corporations do it, no one screams that Sweden is taking over.

We could capture the same sweet deal if we cut out the middleman and insure ourselves. Single-payer health insurance, or at least, a public option, is the counterpart to captive insurance for us peons who get cancer instead of billion-dollar bonuses and $2,000 co-pays for ambulance rides instead of junkets on corporate jets. Under a public option, the government would act as our own wholly owned subsidiary – our nonprofit, low-overhead captive insurer.

Most of the world’s captives are domiciled (sounds so homey) in Bermuda and the Cayman Islands, making them one-stop tropical shops for tax shelters and self-insurance. ​“About 85 percent of the top 50 healthcare systems in the United States have some relationship with the Bermuda market, either through captives domiciled there, or by buying reinsurance for their captives,” insurance insider Judy Hart told the trade group, Bermuda Captive Club.

Vermont, home to the most U.S. captives, lists 856 companies that collect (give themselves) $16 billion in premiums. These include Goldman Sachs, AstraZeneca, Pfizer, Wal-Mart, Archer Daniels Midland, Bank of America, AT&T, and dozens of for- and not-for-profit healthcare-related companies like Wyeth Holdings, Kaiser Foundation Health Plan, Coventry Health Care and Humana.

We could do worse than become fellow travelers. Instead of calling public health insurance pull-the-plug-on-granny socialism, we could take a page from the corporate handbook, and call it captive.