Three models of health insurance: the conceptual pluralism of the Patient Protection and Affordable Care Act.

• Author: Hoffman, Allison K.

What risks should health insurance mitigate? American health scholars, politicians, and the public at large answer this question ambivalently. This Article. defines three dominant conceptions of health insurance that weave throughout popular and academic discourse and that echoed in the 2010 health reform debates. The first conception is that health insurance should primarily serve to mitigate harms to health. This "Health Promotion" theory relies on using health insurance to pay for medical care that most cost-effectively preserves and improves health. Alternately, health insurance might primarily mitigate risks to wealth from high medical care costs. This "Financial Security" theory demands that health insurance limit financial insecurity from these costs. Finally, the "Brute Luck" theory, highly sensitive to the possibility of adverse-incentive effects arising from moral hazard, demands that health insurance protect primarily against unavoidable or "chance" health risks that do not arise from individual behavior. This last theory thus seeks to preserve incentives for insureds to prevent risk themselves, while insurance neutralizes harms from random poor health. Each theory implies distinct principles to guide premium pricing and allocation of premium dollars toward medical care.

The new health reform law, the Patient Protection and Affordable Care Act of 2010 (PPACA), manifests this "conceptual pluralism. " It evokes all three of these notions of the types of risks Americans should share--now more collectively post-reform--through insurance. While the goals of these three theories dovetail at times (e.g., promoting health will in some cases also reduce medical care costs), at other times they are at odds. Conceptual pluralism thus complicates implementation of PPACA as regulators must manage tensions and make tradeoffs among these goals.

The framework offered in this Article is important for two reasons. First, creating a roadmap to understand the different conceptions of insurance, and the values that inform them, brings awareness to the root cause of tensions that will arise as PPA CA is implemented. Second, this framework elucidates the different ends that health insurance could serve and thus enables clearer future reflection and debate on what ends it should serve and to what degree.

INTRODUCTION I. HEALTH INSURANCE, THE DISTRIBUTION OF RISK, AND ENHANCED SOLIDARITY UNDER PPACA II. THREE CONCEPTIONS OF HEALTH INSURANCE A. Health Promotion 1. Theory 2. Health Promotion Policies of PPACA B. Financial Security 1. Theory 2. Financial Security Policies of PPACA C. Brute Luck 1. Theory 2. Brute Luck Policies of PPACA D. Conflicts and Policy Discordance 1. Discordance Arising from Health Promotion Policies 2. Discordance Arising from Financial Security Policies 3. Discordance Arising from Brute Luck Policies III. MANAGING CONCEPTUAL PLURALISM AND THE IMPLEMENTATION OF PPACA A. Challenges of Interpretation B. Challenges of Evaluation C. Challenges of Prioritization CONCLUSION: THE FUTURE OF CONCEPTUAL PLURALISM AND HEALTH INSURANCE INTRODUCTION

Health insurance has become a regular topic of dinner-table and watercooler conversations with the recent passage of a national health insurance reform law--the Patient Protection and Affordable Care Act (1) and the Health Care and Education Reconciliation Act of 20102 (collectively referred to herein as "PPACA"). But when Americans talk about health insurance, they are not all talking about the same thing.

Americans simultaneously hold several conceptions about what health insurance is (and often, impliedly, should be). Some think health insurance should pay for care to maintain our health. Others see it as a tool to protect us against medical bankruptcy or other types of financial insecurity that arise from expensive and rising medical care costs. Finally, others think it should indemnify costs we cannot reasonably prevent on our own--unavoidable risks. Some think insurance should serve two or three of these goals simultaneously. Yet, each of these three conceptions implies a distinct starting point for determining what health insurance should accomplish and for whom.

This Article draws on scholarly, political, and popular discourse on insurance to define what I contend are the three dominant American conceptions of health insurance. (3) The ideas and arguments underlying these three distinct (yet overlapping) models of health insurance have for years colored discussions of health insurance, most recently woven throughout health reform debates, but this Article is the first to untangle and explore them systematically. By making explicit this conceptual pluralism, this Article elucidates normative underpinnings of health insurance debates, as well as the root causes of tensions that will arise as PPACA is implemented.

PPACA has shone a light on medically related risks and how we manage them. The law amplifies the importance of collective risk management through health insurance as described in Part I. This Part reviews how PPACA increases the extent to which health insurance redistributes risk. For example, the law requires Americans to carry healthinsurance, (4) increasing the population who will engage in collective risk management. It also requires private health insurance to be more "solidaristic," characterized by broader sharing of risks among rich and poor, and among healthy and sick (what I have previously described as "health redistribution" (5)). (6) However, it does not privilege a singular conception of the risks Americans must share, now more collectively, through mandatory health insurance. Rather, the law mirrors normative values underlying all three dominant American conceptions of health insurance.

In Part II, I examine the three theories in depth, including arguments in support of each theory and different ways that the values behind these theories might be translated into practice. The first theory is that health insurance should promote health. (7) Insurance dollars are most valuable, according to this notion, if spent on interventions that cost-effectively maintain or improve health. Core characteristics of insurance from this perspective include prioritized spending on high-value care, defined as care that produces the most health benefit per dollar spent, and less spending on what are generally considered lower-value interventions, such as high-end diagnostics and, often, end-of-life care. (8) This "Health Promotion" paradigm of health insurance is reflected in the work of scholars such as Larry Gostin who think about health insurance in connection with broader public health goals (e.g., education, nutrition, and housing), or those, such as Michael Chernew, Donald Berwick, and Michael Porter, who think about improving the value of health care through organizational design. (9) Key PPACA policies could be understood to reflect this conception of health insurance. For example, the law prohibits insurers from charging copayments for preventive care, under the presumption that such care is relatively high value, so that every American can seek out basic preventive services without paying a dollar of her own money, regardless of individual ability to pay. (10) In so doing, it creates a strong incentive for every American to consume preventive care, with the goal that such care will improve health and quality of life, even if it does not save money in the long run. (11) This theory also undergirds investment in comparative effectiveness research, which aims to identify the relative value of heath care interventions. (12)

The second theory is that health insurance should first and foremost mitigate financial vulnerability arising from health care spending. Professors Jerry Mashaw and Michael Graetz, for example, have embraced this "Financial Security" notion of health insurance in their book True Security. (13) This theory is also echoed in recent literature on underinsurance, health expenditures, and medical bankruptcy by Jacob Hacker, Melissa Jacoby, David Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler, among others, who criticize insurance for not providing sufficient financial protection." (14) This approach prioritizes indemnifying medical expenses that significantly threaten financial stability. (15) Key policies of PPACA are designed with such a goal in mind. For example, the law caps possible out-of-pocket cost-sharing obligations for all policies. (16) It also provides subsidies that prevent insureds from paying more than a certain percentage of their income toward premiums and cost-sharing obligations. (17)

The third and final theory is that health insurance--in the classic image of liability insurance--should protect primarily against those risks an insured should not reasonably avoid on her own, including risks whose avoidance would be unduly expensive or burdensome. This "Brute Luck" approach to health insurance is justified in two different ways. (19) First, some "luck egalitarians" demand heightened attention to neutralizing suffering from unavoidable harms. (20) Others, including Kenneth Abraham and Mark Pauly, argue that such an approach will promote more efficient risk avoidance or limit moral hazard. (21) This particularly American notion requires those who assume a higher risk of poor health to pay more for protection against the harms and costs that may ensue. In contrast, insureds who prevent such risks through healthy lifestyles (e.g., eschewing smoking and fast food) and cautious living (e.g., limited skydiving or helicopter-skiing adventures) pay less. In the same way that home insurance will not compensate for damages caused by a fire that the homeowner intentionally sets or the way that life insurance policies might exclude suicide within a period after the policy is initiated, (22) health insurance might not reimburse harms that are self-inflicted, negligently induced, or avoidable...