Why the ACA is the death knell of for-profit health insurance

[damonm]

Whether you are a believer in the benefits of single-payer health coverage or an opponent, mark this year down on your calendar because this is the year seismic shifts in our health care system finally begin. If you thought that the Obama Administration wussed 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.
(snip)

The medical loss ratio 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. If they fail to do so, the insurers will have to send their customers a rebate check representing the amount in which was left unspent on actual medical care. This one item will have more impact on the future of how medical care is paid for in this country than anything I’ve ever seen. This aspect of the law represents that which will ultimately lead to the demise of large parts of the private, for-profit health insurance industry. Why? Because there is virtually 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.

Full article at: http://www.addictinginfo.org/2012/01/04/obamacare-is-already-helping-the-99-now/

[comipinko]

1. Watch as the hundreds of "waivers" are issued.

They will NOT be kept from thier profit!

[Magoo48]

3. I will rejoice when it comes to pass. Here's hoping tho...

[damonm]

6. FTA:

"And if reports are true, HHS isn’t screwing around. They actually mean to see to it that the insurance companies spend what is appropriate in taking care of their customers. Example: For months, health insurance brokers and salespeople have been lobbied 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. Also last November, the HHS gave them the official thumbs down on the inclusion. Essentially, the insurance companies wanted selling me a health insurance policy to count the same as providing me with the medical care to which I am entitled under the policy. Sales is, and always has been, clearly an overhead cost in every other legitimate business. If HHS had 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."

[zipplewrath]

2. I keep seeing this assertion repeated

But I never see the explanation of how a company can't survive on a 15 - 20% profit margin. There are many businesses that operate on MUCH lower margins.

If anything, this will prevent cost savings in CARE since the more they spend on care, the more proift they can make.

[Geoff R. Casavant]

7. That 15-20% doesn't represent only profit

It's overhead (advertising, employee compensation and costs, rent, utilities, etc.) and profit. I think most insurance companies already pay around 75-80% of general revenues in actual care so basically you're looking at a bump of 5% or so. The overhead stuff can't really be reduced much without the kind of adverse effect on business that loses customers, so it comes out of profit.

I think your reasoning may be off in your second sentence -- the only real source of revenue for a health insurance company is what is paid in premiums, so the more they spend on care, the less there is for profit.

[zipplewrath]

8. Actual vs percentage

They can raise their total profit, by raising their total expenditures, they just have to charge more premiums. As long as their margins aren't over 15 - 20% they're fine.

It's not so much that they'll artificially charge more for health care, it's just that they'll have a disincentive to work for lowering health care costs. The lower the costs, the lower the actual profit they can achieve.

And there will be an ongoing battle over exactly what constitutes "health care expenses", and I suspect as with most regulation, they will ultimately get alot of things included so as to make as much of the remaining 15% pure profit.

[Geoff R. Casavant]

9. Ah, I see what you're saying now.

I think your post left out some of the intermediate steps in your reasoning -- your brain was moving too fast for your typing fingers.

The article indicates you are at least partially correct -- they are already trying to get some items like advertising classified as health care expenses. But so far HHS isn't going for it.

And yes, raising premiums will increase the actual dollar amount of profit for a while, but in a few years I believe the government plans will kick in too, and if the private plans are too expensive a lot of folks will jump ship.

[zipplewrath]

13. government plans?

Are you talking about the exchanges? They'll have to buy the same expensive health care as everyone else. Without the ability to drive down health care costs, health insurance will just get more expensive.

[annabanana]

14. They actually tried to get LOBBYING classified as "health expenses"..

Fortunately, the assembly of State insurance regulators quashed THAT abomination.

[kristopher]

19. You're correct.

The "cost plus" model is the foundation of regulated utilities and the problems there are constant pressure to grow the size of the revenue stream in order to grow the profit.

The idea that this is a threat to private insurance isn't credible as far as I can see.

[Myrina]

10. ... so if employees are part of that 15% ...

... we can expect more offshoring, soon, to preserve the profit margin for the Execs and shareholders ...

[RC]

11. The things you listed are taken out of the profit.

You seem to be thinking gross receipts. Overhead is not a part of the profit.

[freshwest]

4. And it's the reason for the media hysteria generated by those corporations and the Tea Party raving

About Death Panels, and the lies pushed about astronomical increases to Medicare, etc. This won't get mainstream coverage, they blocked getting the facts in the bill out all along. That was done to make progressives to lose heart and it worked.

Because the media is controlled by the corporations and even the 'left' websites spin the same tale. The information is consistently skewed against the Democratic POTUS. In the end, it will be Medicare for all, just as we wanted it to be.

I wonder if the rightwingers will apply this lesson to the other things that they've been lied to about, like Obama coming for their guns and kids, forcing vaccinations, Sharia law, FEMA camps for conservatives and all the other lies they've been told.

We need to put the word out about this and other things to combat their media machine. Because they won't stop lying and we can't give in.

[Old and In the Way]

5. I've read that some of these for-profit companies are dropping out of some markets already.

If they are constrained from their practice of fighting claims to increase their gross profits, I'm OK with this. I hope the current framework accelerates their demise. We need a comprehensive single-payer program that reflects the current realities of the cost of healthcare. If the USG healthcare program is good enough for Congress, it's damn well good enough for the rest of us.

[eridani]

12. 15 states have already tried regulation by MLR

All have totally failed. Where do you think the government gets the numbers from?

[The Doctor.]

15. It'd be nice to see where *you* get those numbers from.

I mean, 'cars make french-fries' is a possibility too, but I'd like to see how.

[eridani]

16. The following is a comprehensive list of state attempts at regulation

http://www.familiesusa.org/assets/pdfs/medical-loss-ratio.pdf

If any were worth warm spit, why have health insurance premiums more than doubled since 2000?

Dear Mr. and Mrs. Sarkisian:

We were sorry to hear that your daughter Nataline died because CIGNA denied your claim for her liver transplant. However, you will be glad to know that we have analyzed CIGNA’s medical loss ratio and that all of their customers are entitled to premium refunds. Isn’t that wonderful?

Yours truly,
Dr. Pangloss

[The Doctor.]

17. Thanks. Something to pour over.

[yurbud]

18. I sincerely hope this is true

[Fumesucker]

20. I don't believe that for a nanosecond..

What we got was designed to lock the public into for-profit health insurance and it will function as intended..

There's a reason single payer advocates were locked out of the discussions on "reform".