Tuesday, March 15, 2011

Rocky Weighs In

For those not directly affected by some of the constraints of Obamacrap, the letters MLR mean nothing to you. But one of the provisions of Obamacrap is a requirement that health insurance carriers meet certain guidelines for medical loss ratio's (MLR).

In simple terms, the carrier must pay out at least $0.80 of every dollar taken in for individual health insurance and $0.85 of every dollar for insured group health plans. The payout must be for claims including reserves.

If they do not meet these goals they must essentially declare a dividend and refund the difference in the $0.80/$0.85 to policyholders.

The brainiacs in Washington thought this would reduce premiums and make health insurance more affordable.

Truth is, this crunch has resulted in a few carriers throwing in the towel (and at least one in Maine that threatened to leave) meaning LESS competition in certain markets.

Less competition = higher premiums.

All the carriers I know have laid off home office and field staff as well as cutting compensation to agents by 50% or more.

Some may see this as a good thing, as long as you don't consider the downside of layoffs. More people out of work and collecting unemployment plus fewer workers to answer policyholder questions. In other words, if you call, expect to be on hold for a while before a human answers and when you do get someone don't expect them to spend more than 3 minutes addressing your issue.

As for agents, many have already left the industry which is not altogether bad since some never should have been here any way. Those that stay can no longer spend time helping clients the way they once did since they are earning half what they did last year.

All this leads to an article in a trade publication about MLR and industry representatives trying to get some relief. The National Association of Health Underwriters (NAHU) is trying to growsome testicles after getting on the Obamacrap bus and supporting this mess all the way until it became law.

Then, just like Nancy Pelosi, they finally read the law and found out what was in it and they did not like what they saw.

So where does Rocky come in?

Sen. Jay Rockefeller has decided to fight any effort to modify Obamacrap where it pertains to MLR calculations. According to him, while he "recognizes the valuable work of agents" he fails to see the other side of MLR.

“I cannot support a proposal that would allow agents, brokers and health insurance companies to retain the estimated $1 billion in benefits that American consumers will receive next year thanks to the health care reform law,” Rockefeller says.

I have no idea where he got this figure. Probably like all other numbers from Washington he pulled them out of his butt.

Even if the savings is a billion it is not being returned in the form of lower premiums. Rather, it is resulting in less customer service, tougher underwriting which makes it more difficult for people to obtain individual health insurance and higher (not lower) rates.

“I am encouraged by the fact that the new law is prompting many health insurance companies that were not meeting these targets to conduct a long-overdue review of their business operations and make changes that will result in higher-quality care and lower premiums for their customers,” Rockefeller says.

What is his standard for "higher quality care"?

Surely he knows that health insurance is not the same as health care. With reduced staff, policyholders are actually getting a lower quality of care from a customer service perspective.

One side effect of reduced commissions is carriers are seeing more direct business (applications that do not originate from brokers) as well as agent directed business that has not been pre-qualified. The result is higher rejected applications, some as high as 50%, and more business issue that is "not taken".

That is an industry term which means the policy was approved but the offer was not accepted since it was different from what the applicant expected.

Direct business is more costly to underwrite and service than agent directed business. It also has a tendency to lapse, usually within 6 months vs. agent business that has a 2 - 3 year life expectancy. (Some of my clients have been on the same plan for 5 years or more).

All of this was easy to predict, along with higher premiums. It doesn't take a rocket surgeon to figure out if you require carriers to provide more benefits, tell them they cannot deny coverage to children, regardless of their medical condition, and set strict guidelines for claim payout the result would not match the campaign promises of lower premiums and more accessibility to health insurance.

The Obamacrap bus is headed straight for a cliff and everyone in the country is along for a very short and disastrous ride.

Smaller cars, bigger health insurance, Poppa Washington.

blog comments powered by Disqus