What is the primary role of reinsurance in healthcare?

The primary role of reinsurance in healthcare is to limit a policyholder's liability for catastrophic claims. Reinsurance acts as a financial safety net for insurance companies, allowing them to transfer some of the risks associated with large or unpredictable claims to another insurer. This is particularly crucial in healthcare, where unexpected high-cost claims can significantly impact an insurer's financial stability. By spreading the risk of these large claims across multiple insurers, the primary insurer can maintain a more stable financial position, ensuring that they can continue to provide coverage and manage their obligations to policyholders effectively.

While other options touch upon aspects of the healthcare system, they do not encompass the fundamental purpose of reinsurance. Enhancing service delivery, providing lower premiums, or increasing provider profitability can be outcomes influenced by various factors within the healthcare system, but they do not directly relate to the principal function of reinsurance in managing risk associated with catastrophic claims.