The medical loss ratio game

The Department of Health and Human Services largely rubber-stamped the NAIC’s recommendations for medical loss ratios. Recall these are the rules behind calculating that health insurers spend 80 cents of the premium dollar on providing medical services (85 cents for group health plans). Insurance Journal summarizes here.

Unhappy are the insurance agents. They wanted commissions left out of the formula, since that essentially caps their income. You can hear their complaints here. Though I wouldn’t be surprised if they find a way to, at least in some states, add placement fees. Agents routinely charge these in nonstandard auto markets (where the hard-to-insure find policies with low limits and low premiums).

Also, more people will be buying individual policies, so while commission rates may fall, agency revenues may actually increase.

You may think I am not too sympathetic to the agents’ plight, and you’d be right. Our health care system is so bloated that to fix it, everybody is going to have to take a financial hit – hospitals, doctors, insurers and, yes, agents.

How bloated? Well, yesterday the International Federation of Health Plans published its annual comparison of health care costs across countries. Here’s a typical slide from the pdf:

We pay twice the going rateYeah, we pay twice as much as anybody else for an appendectomy.

And passes along the latest Commonwealth Fund report showing, basically, that we have the worst health care in the world:

Americans are the most likely to go without health care because of the cost and to have trouble paying medical bills even when insured, a survey of 11 wealthy countries found Thursday.

“The US stands out for the most negative insurance-related experiences,” the New York-based Commonwealth Fund, the private foundation that carried out the study, said in an accompanying statement.

The study found that a third of US adults “went without recommended care, did not see a doctor when sick, or failed to fill prescriptions because of costs,” it said.

That compares to as few as five to six percent in the Netherlands and Britain, according to the study.

Just remember as the next phase of the health care debate rolls out – any repeal of Obamacare returns us to this status quo.


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One thought on “The medical loss ratio game

  1. politicaljules says:

    There is so much wrong with your assumptions it is hard to know where to start. You fail to see the manipulation and the bigger picture.

    First addressing the appendectomy claim. Costs are higher for many reasons but mainly because the technology used in the US routinely for an appendectomy is not used in those other countries because it is expensive. However, in the US an appendectomy can be done and the patient can go home the same day or the day after. That does not happen in other countries and you have left out many factors in that equation such as complications and hospital stays as well as the number of deaths occurring in socialized medicine because people had to wait. Poor government regulations and lack of adequate payments from government care has also created the crisis of higher costs. I am not saying it is right or nothing should be done, but trying to fix the problem with what caused it in the first place is comical.

    Now for the added regulation that is nothing more than smoke and mirrors. The way I read the new rules is that 80% of every premium dollar will be the mandated amount to be spent on patient care. Which is laughable because PriceWaterhouseCooper’s analysis currently puts the average number at 87% and can be seen here:

    I was able to easily use the internet to google that fact, so mandating rules that only 80 cents of every dollar must be spent on the patients is actually the wrong direction!!

    Sebillius is giving health insurance companies a raise by lowering the bar from 87 to 80 and she is taking 7 cents AWAY from patients while she manipulates the news and lies to the face of the American people. And it is sad how many people are ecstatic about this.

    Oh and these supposed REBATES? I have serious doubts about that one. The auto insurance industry is one I have hand’s on knowledge of, and those rebates you get for any number of reasons (no accidents etc) are nothing but a false manipulation of the public mind. Which is exactly what is going to happen here. Consumers are not getting anything they would not have gotten before and always pay extra out of their pocket. Extra amounts are charged to higher premiums and held back, then returned to the customer less a service charge. Premiums always went up for accident prone policies, so auto insurance started charging higher premiums from the beginning, and then lowered them just a little bit or rebated ultra perfect drivers of which there were few. Then raised rates even higher when you did have an accident. All to make the consumer think they are getting a rebate. In actuality they are only getting fleeced.

    So this is nothing new. The bar being lowered from 87 to 80 not only gives the insurance companies a raise but takes away from patient care. At 87 currently spent on medical care, 13 cents of every dollar already goes to administration costs. Yet Sebillius simply took 7 cents on the dollar to make it ok to spend 20% on admin payroll according to the new rules. And then posted the big announcement as if she is somehow helping patients?

    Time to wake up. We are being played like an old tired fiddle, and unless someone stands up to the manipulation, we will always suffer the same fate.

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