Solution: Health insurance through life insurance policies

If they tied life insurance benefits to the level of lifetime health insurance claims, such policies would also force Americans to make end-of-life decisions they currently rarely face: is it worth losing a substantial portion of one’s estate to prolong life another week? Month? Year? The tie-in would also keep healthy individuals from dropping coverage by rewarding their good health with a bigger life insurance payout, a twist on the old tontine idea.

Of course some tricky regulatory and actuarial issues would need to be worked out but the mutual form and participating nature of the policies entail a good deal of self-regulation. Moreover, we know enough from regulating mutual life insurers for well over a century to formulate decent regulations from the start.

Such policies would also become important savings vehicles. From the Civil War until World War II, life insurers played a major, positive role in the development of U.S. industry by linking the savings of many small investors to the financing needs of corporate innovators and entrepreneurs. Americans’ savings rate has since dwindled, virtually to nil. National mutual health insurers would reprise that important intermediary role as Americans begin to save for their futures once again, through the Health Through Life policies advocated here.

Robert E. Wright is the author of the forthcoming “Fubarnomics” (Prometheus) and the Nef Family Chair of Political Economy at Augustana College in Sioux Falls, S.D.