Cleaver Insurance, LLC

John Hunter

May 6, 2017

Back in the good ol’ days, the ’50’s, when Ike was in the White House and Ward and June were on your seven-inch Philco TV, most health insurance companies were what is known as mutual insurance companies. That doesn’t mean they insured each other; in this context, it means that the companies were owned by their policyholders. Every policyholder had a “share” in the company, and had a vote in the company’s planning and decision-making. The company’s profits were either paid to the policyholders as dividends or retained as reserves against future claims. This model worked very well for a long time, and it still works well today; many of the largest life insurance carriers (Northwestern Mutual, Mass Mutual) are still mutual companies.

However, sometime back in the ’90s, it became apparent to the executives running health insurance companies that there was more money to be made if those pesky policyholders were cut out of the loop, and the executives were allowed to make decisions based on profitability, rather than on the benefit to the company (and those pesky policyholders) as a whole. So the executives sold the policyholders on the idea of demutualization, and there was a wave of these transactions. There are a few holdouts; Mutual of Omaha is probably the best-known mutual health insurer, thanks to Marlin Perkins as well as their insurance business.

The mutual model deserves to be revived in the health-insurance field. Imagine the possibilities of a government-backed mutual insurance company, something like Fannie Mae or Freddie Mac are for mortgages. We could have relatively inexpensive basic health insurance, with riders you could add to cover things like infertility treatment, weight-loss surgery, plastic surgery-a completely a la carte health insurance system. The possibilities are endless.

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