Authors James Hayes, Joseph Cole and David Meiselman discuss the derivatives revolution, highlights the development of health insurance futures, and provides a hypothetical hedging example for a health insurer.
It also plans to list homeowners and health insurance futures and options contracts in the first half of 1993.
The main purpose of hedging with the proposed health insurance futures is the management of the risk in changes in claims cost arising from unexpected volatility in the trend of these costs.
The objective of the contract design of the CBOT health insurance futures contract is to create an index that reflects value for the industry.
If your company is considering taking the self-insurance route to control healthcare costs, maybe you should investigate health insurance futures
Nearly twenty years later, James Hayes published probably the first paper specifically on health insurance futures in "Hedging Opportunities in Health Care" (Health Care Strategic Management, March 1990).
The National Association of Business Economists (NABE) took an early and aggressive lead in providing information on the development of health insurance futures to its members.
Several contracts, including health insurance futures contract, have been approved by the Commodities Futures Trading Commission (CFTC).
The health insurance futures contract prices claims in the small group market, details of which are provided below.
Rosenthal, Leslie, 1991c, New CBOT Futures Contracts Developed to Help Hedge Insurance Risk, Health Insurance Futures Report, In June 1990, the Chicago Board of Trade (CBOT) submitted for approval with the Commodity Futures Trading Commission two insurance futures contracts, one based on health insurance and one on automobile collision coverage.
In February 1991, the CBOT set a target date of October 1, 1991, to begin trading health insurance futures.
The policy requirements for inclusion in the health insurance futures index include deductible levels, minimum benefits, coinsurance provisions, group size, and a twelve-month policy term.