Is “Whole Life” Health Insurance Possible?

MetLife (MET) characterizes Whole Life as permanent life insurance along with Universal Life and Variable Universal Life. I would like to focus on basic whole life as a model for health insurance because it is the most straightforward. The other products mix varying degrees of investment risk with the insurance death benefit.

MetLife’s whole life policies guarantee level premiums, cash value, death benefits, and the possibility of dividends. Like life insurance, most health insurance policies contain a lifetime benefits cap. A good health insurance policy might cap lifetime benefits at $2M or more. Unlike life insurance, only term health insurance is available. Most states regulate guaranteed renewability for individuals that retain the same plan and insurer, but none of the other benefits of whole life are available.

Historically, life and health insurance purchasing behavior has differed in the US. A majority of Americans still get some form of health insurance with their jobs and only have to purchase health insurance during employment interruptions, starting a new business, or early retirement. On the other hand, life insurance benefits from employers are viewed as a supplement to a family’s self-purchased protection.

Given the premise that most Americans start out life healthy, buying the right to guaranteed level premium health insurance could be a tremendous economic benefit for families. The life insurance industry has long been able to convince parents to purchase life insurance for their children. The premise being their children might not qualify for medically underwritten life insurance later in life.

Whole life health insurance could be structured to supplement any gaps in employer provided care or completely independent. Unfortunately, most private health insurers don’t allow policy holders to have multiple health insurance policies (like Medicare supplement plans). This would put employer plans in conflict with whole life plans. Policy holders’ free will, such as employment choice and life style behavior, would affect the insurers’ payout risk.

I believe whole life health insurance is not only possible, but required to mitigate the anxiety in the American private health insurance system. The regulators surely could come up with payout rules when multiple policies are in force. Just think about first and second liens, or multiple classes of preferred stocks and bonds. Let’s get the actuaries to work.

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