Obscure Obamacare Clause Takes Effect Today - the "Medical Loss Ratio"

[Anton]

From Forbes
http://www.forbes.com/sites/rickunga...day-halleluja/

I have long argued that the impact of the Affordable Care Act is not nearly as big of a deal as opponents would have you believe. At the end of the day, the law is – in the main – little more than a successful effort to put an end to some of the more egregious health insurer abuses while creating an environment that should bring more Americans into programs that will give them at least some of the health care coverage they need.

There is, however, one notable exception – and it’s one that should have a long lasting and powerful impact on the future of health care in our country.

That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers’ premium dollars they collect—85% for large group insurers—on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.

This is the true ‘bomb’ contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we’ve seen in quite some time. Indeed, it is this aspect of the law that represents the true ‘death panel’ found in Obamacare—but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.

Why? Because there is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid. If they could, we likely would never have seen the extraordinary efforts made by these companies to avoid paying benefits to their customers at the very moment they need it the most.

Today, that bomb goes off.

Today, the Department of Health & Human Services issues the rules of what insurer expenditures will—and will not—qualify as a medical expense for purposes of meeting the requirement.

As it turns out, HHS isn’t screwing around. They actually mean to see to it that the insurance companies spend what they should taking care of their customers.

Here’s an example: For months, health insurance brokers and salespeople have been lobbying to have the commissions they earn for selling an insurer’s program to consumers be included as a ‘medical expense’ for purposes of the rules. HHS has, today, given them the official thumbs down, as well they should have. Selling me a health insurance policy is simply not the same as providing me with the medical care I am entitled to under the policy. Sales is clearly an overhead cost in any business and had HHS included this as a medical cost, it would have signaled that they are not at all serious about enforcing the concept of the medical loss ratio.

So, can private health insurance companies manage to make a profit when they actually have to spend premium receipts taking care of their customers’ health needs as promised?

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Not a chance-and they know it. Indeed, we are already seeing the parent companies who own these insurance operations fleeing into other types of investments. They know what we should all know – we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it.

Whether you are a believer in the benefits of single-payer health coverage or an opponent, mark this day down on your calendar because this is the day seismic shifts in our health care system finally get under way.

If you thought that the Obama Administration chickened out on pushing the nation in the direction of universal health care for everyone, today is the day you begin to understand that the reality is quite the contrary.

If you believe that the end of private, for-profit health insurance is some type of nefarious step towards a socialist society, then you might want to attend church this Sunday to mourn the loss of health insurers being able to worm out of covering the bills of a cancer patient because she forgot to write down on her application that she had skin acne for three months when she was a teenager.

Of course, those of you who fear the inevitable arrival of universal health care really shouldn’t be too fretful. There will always be a for-profit health insurance industry for those who want to pay for it. The only difference will be that those who cannot afford private coverage will also have an opportunity to get their families the medical care that they need

Everyone wins-except the for-profit health insurers.

I can live with that.

Apparently, there's a similar law in Switzerland regulating how much large insurers have to spend on their policies, and there's plenty of them still around there.

From the author:

I would expect there will be some private business for those who are able to pay higher premiums than what government will charge to get faster service, etc. See the British system for an example. Everyone is entitled to NIH – but wealthier people pay a premium for additional private coverage that gets them into the doc for things they would have to wait longer for under the NIH. Annual physical, etc. Critical medicine remains under the NIH because there really is no waiting time for life threatening or truly serious health situations.

That is precisely the point behind the mandated coverage – so you won’t have to pay for so many others as they take personal responsibility to pay for themselves. You see, this is precisely why the concept of mandated health insurance coverage was created by the highly conservative Cato Institute and supported by people like Newt Gingrich. In other words, it was a Republican idea until Obama adopted it, at which point it suddenly became unconstitutional and un-American.

What do you think? About time? Damn Communists?

[Cantih]

Hooray

[Plow]

Because there is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid. If they could, we likely would never have seen the extraordinary efforts made by these companies to avoid paying benefits to their customers at the very moment they need it the most.

forbes hurts my brain

[Darus Grey]

Hooray

Seconded, Huzzah even.

As pointed out, other countries have such a rule, and the only major consequence was that people got better care because of it, shocking.

[hey]

What % do they pay now, on average?

[Darus Grey]

20-40% off the top of my head, been awhile since I did all my healthcare research.

Majority of it was adminsitration costs, i.e. executive pay.

[Apelila]

forbes hurts my brain

There is heavy opinion in that sentence you quoted, I'll give you that.

Having said that, I dont think this industry should be about extreme profits for administrators.

[Seanr]

This sounds good, I just started a job in September, and health benefits started coming out of my checks like 2 paychecks ago. I'm glad all this is goin down

[Ragnus]

[kuronosan]

I'm surprised people don't understand what this means. Essentially, the health care premiums you have been paying to insurance companies have been going straight to their pockets and not into the insurance pools. When your premiums go up, it's so they can keep earning what they earn now... not so you can continue getting quality care.

For the most part, making 80% of the premium go towards actual care means many providers may raise premiums to compensate but in time they will go down as money actually goes towards the cost of care and not towards some fat asshole's bank roll.

[Esvedium]

This x eleventybillion!

[Emirii]

My dad pays 250$ a pay check for somewhat high-end coverage in Texas for him and I, and we still have to pay a lot out of pocket for meds and stuff. A 1,000$ deductive for any office procedure/surgery with a 30/70 copay including birth control implants which SHOULD "should" be "free" to me seeing as I have the women's health plan that covers all prevention stuff. We give them way more money than we are ever getting back in benefits. It's ridiculous. If they are going to do this and raise premiums, they better pay 100% costs.

One thing that pissed me off and which still pisses me off, is that I had to pay 1,000$ for a birth control implant that was a tiny shot in my arm, which should have been free along with other birth control methods, and the office specifically said i would not be charged no more than the 30$ visit fee, until i got that bill in the mail. I called insurance and they said that i could not get out of it because it was an "office procedure" and it negated the women's health thing. I also go to a low-cost women's health clinic who does procedures for about 60% the cost of normal clinics. I asked for a copy of the bill they sent my insurance, and it was only for a total of 650$. My insurance turned around and charged me 1,000$ for this "office procedure." If i hadn't even used my insurance, it would have SAVED me 350$. In the end, I did get the bill reduced to 500$ after mailing them a personal complaint letter, and getting the office involved. Either way, because of that damn insurance, a 30$ item costed me 500$. And yes, the implant was "covered" under my insurance also.

The healthcare system is broken and I'm definitely worried that it will just get worst, seeing as a few years i have to find my own insurance. It's just pretty ridiculous, and I feel sorry for the people who are too ignorant (or lazy) to fight for themselves with insurance companies and just pay for it. You would think with a free market they would have competitive process and services, but they are all working together like a monopoly. In Texas we have a free market with electricity, and I pay some of the lowest rates in the country for my electricity (11 cents a kw/hr)

The only way to see if wait it out and see what this really does and if the big wigs will be ethical about it (lolz yarite)

[Acturus]

A big vague area of this provision was what to consider Medical expenditures. Since last year, a number of insurance companies have gotten creative with what they justify as medical spend. I'm curious as to whether or not the final regulations that should be enforcing this provision identify medical spend.

[hey]

In Texas we have a free market with electricity, and I pay some of the lowest rates in the country for my electricity (11 cents a kw/hr)

Uh, no you don't. North dakota has an average residential price of under 7 cents per kwh, and most pay less than $.10. $.11 is about average in the US actually.

[Mazmaz]

So Obamacare wasn't useless garbage? It actually has potential to change stuff?

[Gryffes]

Congrats on starting to get 20th century level healthcare eventually america.

[Ferion]

20-40% off the top of my head, been awhile since I did all my healthcare research.

Majority of it was adminsitration costs, i.e. executive pay.

Do you mean 20-40% profit or their loss ratio is 20-40%? It ranges depending on if you're talking about small group or large group, but the aggregate average loss ratio is around 88%.

Edit: By profit I just mean premiums not being paid toward health costs.

[Cleveland_7795]

OWS can expect a few more members when these insurance companies begin laying people off because of this provision. They will make their money, because that's what companies do. No one starts a business to break even. Even hippies who open head shops know this.

85% of income spent on medical care for the 'larger' companies, leaves 15% for payroll, operating costs (building space, communications), and profit. To maximize profit, something needs to be trimmed. And since the government is now dictating what that something is....a lot of people can kiss their jobs (and ironically their medical coverage) goodbye. Less people means less payroll and operating costs.

I am not saying something in the medical industry didn't need addressed, but I wouldn't pat each other on the back just yet. If this goes down as expected, I would expect the number of people out of work to be in the high 5 to low 6 figures. Worst case scenario is some providers just cease to exist. If you cannot make a profit (even a small one), there is no reason to exist.

[archibaldcrane]

OWS can expect a few more members when these insurance companies begin laying people off because of this provision. They will make their money, because that's what companies do. No one starts a business to break even. Even hippies who open head shops know this.

85% of income spent on medical care for the 'larger' companies, leaves 15% for payroll, operating costs (building space, communications), and profit. To maximize profit, something needs to be trimmed. And since the government is now dictating what that something is....a lot of people can kiss their jobs (and ironically their medical coverage) goodbye. Less people means less payroll and operating costs.

I am not saying something in the medical industry didn't need addressed, but I wouldn't pat each other on the back just yet. If this goes down as expected, I would expect the number of people out of work to be in the high 5 to low 6 figures. Worst case scenario is some providers just cease to exist. If you cannot make a profit (even a small one), there is no reason to exist.

Except all that money not spent on administrative costs will be spent on health care, meaning more jobs in the health care field. Yeah, there will be a shift, but I'd prefer my premiums going to doctors and nurses who provide me with care than paper-pushers.

[Kaeko]

OWS can expect a few more members when these insurance companies begin laying people off because of this provision. They will make their money, because that's what companies do. No one starts a business to break even. Even hippies who open head shops know this.

85% of income spent on medical care for the 'larger' companies, leaves 15% for payroll, operating costs (building space, communications), and profit. To maximize profit, something needs to be trimmed. And since the government is now dictating what that something is....a lot of people can kiss their jobs (and ironically their medical coverage) goodbye. Less people means less payroll and operating costs.

I am not saying something in the medical industry didn't need addressed, but I wouldn't pat each other on the back just yet. If this goes down as expected, I would expect the number of people out of work to be in the high 5 to low 6 figures. Worst case scenario is some providers just cease to exist. If you cannot make a profit (even a small one), there is no reason to exist.

I found this response to the OP's article an interesting counter that also addresses your question:

http://www.forbes.com/sites/timworst...-in-obamacare/

Basically insurance companies can actually spend over 100% of their premium $$s on coverage and still net a profit because they invest the $$ in the between the time you paid them and when they had to give it back in the form of coverage.