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Forbes: The Bomb Buried In Obamacare Explodes Today-Hallelujah!


Duckus

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Interesting article from Forbes this past weekend. It will be interesting to see how the 80% regulation effects the industry and if this is really the beginning of a single payer system.

http://www.forbes.com/sites/rickungar/2011/12/02/the-bomb-buried-in-obamacare-explodes-today-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?

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.

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1) I confess to be completely ignorant, but I wonder if the author's gleeful assertion that insurance companies aren't capable of running their company on a 20% overhead, is really true.

2) If his assertion is true, and it's simply impossible for a company to meet this requirement, then I'm not certain that it's really Good News.

3) If his assertion is true, and it's physically impossible for a company to operate on 20% overhead, and if his second assertion is true, that this will result in a single payer system), then does this guy think that the US Government is capable of operating on 20% overhead? Or is he simply gleefully crowing about how we cleverly set an impossible goal, so we could use it as an excuse to have the government then not even attempt to meet the same goal?

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I don't believe Obamacare as written can be that simplistic in it's wording. I can tell you with just the costs eaten up by the federal governments taxation and liability coverages will eat up most of that 20%. There would not only be no profit, there would be losses.

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I don't believe Obamacare as written can be that simplistic in it's wording. I can tell you with just the costs eaten up by the federal governments taxation and liability coverages will eat up most of that 20%. There would not only be no profit, there would be losses.

(The federal government's taxation taxes a percentage of the profits, and a percentage of the company's payroll.)

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1) I confess to be completely ignorant, but I wonder if the author's gleeful assertion that insurance companies aren't capable of running their company on a 20% overhead, is really true.

2) If his assertion is true, and it's simply impossible for a company to meet this requirement, then I'm not certain that it's really Good News.

3) If his assertion is true, and it's physically impossible for a company to operate on 20% overhead, and if his second assertion is true, that this will result in a single payer system), then does this guy think that the US Government is capable of operating on 20% overhead? Or is he simply gleefully crowing about how we cleverly set an impossible goal, so we could use it as an excuse to have the government then not even attempt to meet the same goal?

There's been several threads on here through the years talkinga about reduced overhead in a single payer system.

I don't know what the line is, but it could certainly be reduced.

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Ins is not run as a traditional business, the lack of reserves will kill them

but I do agree that was the goal

as the writer said,they are easier ways to make money if the idiocy is allowed to continue

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(The federal government's taxation taxes a percentage of the profits, and a percentage of the company's payroll.)

No, I understand that. My point was I don't think a company that large can operate on 20% margins given labor costs, plant and facility costs, operating costs, etc. All the profit would be eaten up.

I would bet most health care companies overhead costs far exceed 20%, and getting rid of marketing, etc, as implicated in the article, wont make much of a dent in that 20%.

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:ols:

That assumes not taking into account the two definitions in overhead. The one in the article, and the one by Barbara Boxer. They are clearly different. The one in the article has to assume ALL costs...because they are basing of of 20% off of monies received.

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Anybody know what kind of overhead Medicare currently runs?

how would you separate it and the IRS's payroll collections ect?

would you include other depts related efforts as marketing/customer service ect?

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I can't find the link, but a little over a year ago I remember reading the claim that most insurers -- including the larger ones -- were already within a stone's throw of being able to operate in compliance with the 20%/15% rule, and could easily get there simply by moderating profits by modest degrees. And that the fairly small overall impact to their profitability would drive an equally modest level of investor defection to other investments. The argument in that article was that in light of where the insurers already were, the 20%/15% rule was actually too lenient.

Given that the two claims are essentially polar opposites and both were delivered (to the best of my recollection) with the same general level of presumed authority and confidence, I'll go ahead and take both with a shaker full of salt.

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No, I understand that. My point was I don't think a company that large can operate on 20% margins given labor costs, plant and facility costs, operating costs, etc. All the profit would be eaten up.

I would bet most health care companies overhead costs far exceed 20%, and getting rid of marketing, etc, as implicated in the article, wont make much of a dent in that 20%.

I'd be curious what the numbers look like. Medical insurance is not like most businesses. For a relatively small company paying premiums of say, a million dollars, how much service is required for the $200k?

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:ols:

That assumes not taking into account the two definitions in overhead. The one in the article, and the one by Barbara Boxer. They are clearly different. The one in the article has to assume ALL costs...because they are basing of of 20% off of monies received.

What article?

I'm not clear what your point is.

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The article in the OP. It's laughable what Boxer is claiming to be "overhead" costs. You definitely can't use her "estimate" and compare it to anything in the OP.

---------- Post added December-5th-2011 at 09:12 PM ----------

I'd be curious what the numbers look like. Medical insurance is not like most businesses. For a relatively small company paying premiums of say, a million dollars, how much service is required for the $200k?

Dunno, what's an adequate cost per 1 million members?

Remember there is a need to support the end consumer.

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Well, companies could cut their cost of business by reducing the number of workers whose job is to deny claims, just pay a salary to their sales people instead of huge bonuses, cut their executives salaries. There are lots of things they could do to meet the 80% and still make a profit.

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Well, companies could cut their cost of business by reducing the number of workers whose job is to deny claims, just pay a salary to their sales people instead of huge bonuses, cut their executives salaries. There are lots of things they could do to meet the 80% and still make a profit.

Hey look, a common sense approach that could work.

The Barbara Boxer link referenced a stat that most insurance companies are between 20 and 30%. Obviously the ones closer to 30% are going to have a much harder time adjusting to this, but at the same time those are probably the same ones that shouldn't have been in business in the first place- the profit machines pretending to be insurance companies.

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She is WAY off on Medicare overhead. So much so it is laughable.

Peter already provided a Politifact link that seems to say otherwise

Now, Politifact said that her claim that private insurers ran 20-30% overhead wasn't true. That the most expensive might be in that range, but that the industry, as a whole, was more like 11-12%.

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