"Health Insurance Futures
and Options." Publication of the Chicago Board of Trade, 1992.
Coupled with America's concern over health care costs, "a natural market exists for still another significant derivative product to manage the risk of changes in health care costs." 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 futures price is affected by claims--if claims go unexpectedly up, the futures price rises and vice versa.
If your company is considering taking the self-insurance route to control healthcare costs, maybe you should investigate health insurance futures contracts.
Health insurance futures contracts, a powerful new hedging tool soon to be released by the Chicago Board of Trade, may help companies freeze previously uncontrollable health-care costs.
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).
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. However, in September 1991, the CBOT announced a delay in the commencement of trading 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.