- Sep 19, 2011
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Unbeknownst to a vast majority of people is a gigantic show stopper that was part of Obamacare.
The Affordable Care Act requires health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). It also requires them to issue rebates to enrollees if this percentage does not meet minimum standards. The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases. If an issuer fails to meet the applicable MLR standard in any given year, as of 2012, the issuer is required to provide a rebate to its customers.Medical Loss Ratio - Centers for Medicare & Medicaid Services
Simply put, if an insurance company DOESN"T SPEND at least 80 to 85% of premium dollars on claims...they have to rebate to customers.
Most of you don't comprehend what that means. It was very simple.
The average health insurance company paid out 80¢ for every $1 in premium.
Obamacare required a minimum of 80¢ and as much as 85¢!
That would leave the insurance companies 15¢ for ALL OTHER EXPENSES but most importantly very little in profit.
NOW most of you idiots say well that's good. They make too much profit as it is!
DUMMIES!!!
Where do you think the insurance companies build reserves for future claims? Reserves required by state insurance regulations to be able to sell in the states!
Reserves come from profits. If health insurance companies have operating expenses greater then
15% guess what ? NO Profits. NO profits mean no reserves. No reserves means the state won't let them
sell!
That's why Kentucky’s co-op posted a “medical loss” ratio of 158% for 2014 – for every premium dollar it collected, it spent that dollar and an additional 58 cents on the cost of claims. The co-op now had even less of a margin for error after exhausting its existing federal loan allocations. That sort of performance was not sustainable for Kentucky or for the many other co-ops that are similarly challenged.
400,000 Citizens To Lose Health Insurance (Again) Because Of Obamacare Co-Op Failures
However, the ill-designed structure of the MLR provision may actually have the opposite effect, for two reasons:
First, it is likely to require higher average annual premiums (averaged over several years) for insurers to meet state solvency requirements.
Second, it might end up rewarding who raise premiums.
Those insurers with higher premiums will have to pay higher rebates to consumers, but the MLR formula (probably inadvertently) allows them to retain higher profits if they do so. Furthermore, since a majority of the population will be eligible for subsidies that insulate them from the cost of higher premiums (but still allow them to benefit from rebates), rebates might be used to “pay” customers to enroll in high-premium plans, in effect transferring to insurers large – and potentially unbounded – sums from taxpayers in the form of subsidies unrelated to medical costs. The result could turn out to be free, or even better-than-free, insurance for some individuals and families, and huge profits for insurers – all at the expense of taxpayers.
Rather than restraining insurance profits, the MLR rebates could become a vehicle for funneling taxpayer dollars from the federal government to subsidized consumers and to insurance company profits. In addition, the MLR formula allows insurers who know they will be paying a rebate to increase their medical spending without reducing their profits, thus bending the “cost curve” upward rather than downward.
https://www.americanactionforum.org/wp-content/uploads/files/research/MLR_Paper_Final.pdf
The Affordable Care Act requires health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). It also requires them to issue rebates to enrollees if this percentage does not meet minimum standards. The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases. If an issuer fails to meet the applicable MLR standard in any given year, as of 2012, the issuer is required to provide a rebate to its customers.Medical Loss Ratio - Centers for Medicare & Medicaid Services
Simply put, if an insurance company DOESN"T SPEND at least 80 to 85% of premium dollars on claims...they have to rebate to customers.
Most of you don't comprehend what that means. It was very simple.
The average health insurance company paid out 80¢ for every $1 in premium.
Obamacare required a minimum of 80¢ and as much as 85¢!
That would leave the insurance companies 15¢ for ALL OTHER EXPENSES but most importantly very little in profit.
NOW most of you idiots say well that's good. They make too much profit as it is!
DUMMIES!!!
Where do you think the insurance companies build reserves for future claims? Reserves required by state insurance regulations to be able to sell in the states!
Reserves come from profits. If health insurance companies have operating expenses greater then
15% guess what ? NO Profits. NO profits mean no reserves. No reserves means the state won't let them
sell!
That's why Kentucky’s co-op posted a “medical loss” ratio of 158% for 2014 – for every premium dollar it collected, it spent that dollar and an additional 58 cents on the cost of claims. The co-op now had even less of a margin for error after exhausting its existing federal loan allocations. That sort of performance was not sustainable for Kentucky or for the many other co-ops that are similarly challenged.
400,000 Citizens To Lose Health Insurance (Again) Because Of Obamacare Co-Op Failures
However, the ill-designed structure of the MLR provision may actually have the opposite effect, for two reasons:
First, it is likely to require higher average annual premiums (averaged over several years) for insurers to meet state solvency requirements.
Second, it might end up rewarding who raise premiums.
Those insurers with higher premiums will have to pay higher rebates to consumers, but the MLR formula (probably inadvertently) allows them to retain higher profits if they do so. Furthermore, since a majority of the population will be eligible for subsidies that insulate them from the cost of higher premiums (but still allow them to benefit from rebates), rebates might be used to “pay” customers to enroll in high-premium plans, in effect transferring to insurers large – and potentially unbounded – sums from taxpayers in the form of subsidies unrelated to medical costs. The result could turn out to be free, or even better-than-free, insurance for some individuals and families, and huge profits for insurers – all at the expense of taxpayers.
Rather than restraining insurance profits, the MLR rebates could become a vehicle for funneling taxpayer dollars from the federal government to subsidized consumers and to insurance company profits. In addition, the MLR formula allows insurers who know they will be paying a rebate to increase their medical spending without reducing their profits, thus bending the “cost curve” upward rather than downward.
https://www.americanactionforum.org/wp-content/uploads/files/research/MLR_Paper_Final.pdf
