Sweet Spot

OK, so two guys work for a huge multinational corporation their whole life. Five years before retirement, one stays with the main company, the other is in a group that is spun out and sold. Now both are retired. One has fabulous health insurance for life. The other doesn’t–the spinoff went bankrupt and cut all post-retirement health benefits for pre-retirement employees. They had to honor commitments to everyone already retired (within some limits) but guy #2 is hosed.

So, here’s my simple question: why can’t there be health insurance annuities? You work for lots of companies throughout your lifetime, and you could try to save enough money for post-retirement health care out of pocket, but then you don’t get the benefits of pooling your risk with others. And in the US, if you are old and sick you can’t buy insurance. Why not have health insurance companies create a life insurance/annuity like instrument where you buy into fixed discounts on health coverage to be provided in the future. You’d have to come up with some sort of floating way to determine the coverage levels based on the future standard of care, but you can imagine that this might be addressable using some sort of dollars-to-dollars shopping of health plans from multiple companies. The big annuity could negotiate decent prices with a number of carriers, and treat all these post retirement folks to the benefits big companies provide, like no pre-existing condition limitations, and a large shared risk pool. Kind of like TIAA-CREF for health care.

And, you would even therefore be able to go so far as to incentivize healthful behaviors that pay off in a longer term than ‘until the next open enrollment’. The annuity could manage the longer term risk factors, leaving the insurers to manage the shorter term ones.