Many measures to reform health insurance markets include various types of government-sponsored reinsurance. This article explains the purposes and types of private and public reinsurance, and reviews available evidence about their performance. The author concludes that government-sponsored reinsurance inherently cannot reduce total costs, but it can shift costs from the private to the public sector. Also, reinsurance can help transition to a new government program or market structure that creates uncertain risks. Whether reinsurance is the best way to accomplish these goals depends greatly on the details.

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