Owning the Risk

In the last post, I introduced the Loan Reserve. The loan reserve is a pile of money held aside for medical lending. This medical lending is used in conjunction with medical savings accounts to assure people have resources to pay for health care. NOTE: As people are honest creatures, the bulk of the loans will be repaid. That part of the loan not repaid is the premium policy holders pay to have access to guaranteed interest free medical loans.

In my sample, I set the loan reserves to an amount substantially higher than anticipated lending. I also divvy up the loan reserve so that each policy holder owns a share of the loan reserve.

This design creates a structure where the policy holders directly own the medical and lending risks associated with their policy.

This ownership of risks is very important. After all, insurance companies justify their massive profits by claiming to be the owners of the risk.

Taking this concept of ownership one step further, one realizes that the policy holders are in fact the owners of the Medical Savings and Loan, and that the best corporate structure for the Medical Savings and Loan is that of the Credit Union or Mutual Fund. There, of course, is nothing wrong with a corporation running a MS&L. The pricing of the service should take into account that the policy holders holders own the risk.