Tuesday, May 20, 2014

Health insurers cut profits/admin costs by $1.4 billion

Rick Ungar was the first to name the bomb that was buried in Obamacare - the medical loss ratios. In case you haven't heard, that is the provision that limits insurers profit and administrative costs to 80/85% of the premiums they collect. Anything less that those minimums has to be refunded to their customers.

Now comes word that in 2011 and 2012, health insurance companies sent out rebates totaling $1.5 billion. But get this, they also cut their profits/admin costs.
The rule also led insurance companies to reduce their own profit margins, spending on brokers fees, marketing and others administrative costs to the tune of $1.4 billion. These costs are overhead fees that insurance companies have typically pushed on to their customers.

“The Affordable Care Act has changed how health insurance is bought, sold, and managed and, on balance, those changes have produced substantial benefits for consumers without harming insurance markets,” said Michael McCue, the study’s lead author. “In its first two years, the MLR requirement contributed to a significant reduction in insurance administrative costs, a major source of health care cost growth in the United States.”
An elementary understanding of math says that health insurance companies paid $2.9 billion over those two years (rebates + cost reductions) for the privilege of gaining customers on the health insurance exchanges who cannot be denied coverage based on pre-existing conditions. Excuse me while I laugh at those who said Obamacare was nothing more than a big give-away to them :-)

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