Tuesday, May 31, 2011

Is It Working Yet?

Is Obamacare actually reducing the cost of health insurance and health care? The short answer is no, and it never will.

The folks at Consumer Reports fielded this question and fumbled miserably.

Rather than actually reporting, they took the short route and repeated political rhetoric and theories from the talking heads in the lame stream media.

CR cited these as reasons for hope and change in health insurance pricing.

Unchecked increases in premiums, record insurance company profits, price transparency through imposed medical loss ratio's.

Horse feathers!

Profits Are Good, Not Bad

Insurers are raising premiums on an as needed basis in order to remain profitable. Profit margins on health insurance average about 4% on gross premiums. That means that every $100 in premiums paid yields about $4 in profit. If carriers had no profit there would not be a noticeable drop in premiums.

Looked at another way, if carriers are not profitable they may lack the ability to pay claims which would be much more disastrous than making a nominal profit.

Medical Loss Ratio's Are Meaningless

The mandated medical loss ratio is a mixed bag. While some carriers may have had more margin than others on certain lines, the only thing that really mattered in a competitive market is how does their premium rates compare with others offering a similar plan?

As someone who has worked in the health insurance industry for over 35 years I can tell you consumers are not stupid. They automatically gravitate toward the plan that appears to offer the best value. They could care less about loss ratio's, profit margins or CEO pay. As long as they get a "good deal" the rest is superfluous.

Rate Hikes Are Necessary

All this talk about price transparency is mostly political grandstanding and saber rattling. If the carrier is experiencing a loss, or anticipates a loss on a line of business they must either raise rates to a sustainable level or withdraw from the market. Blue Shield of California has already announced their intention to pull out of the under age 65 major medical market. This decision comes on the heels of other small carriers who have likewise folded and stopped writing new business.

Over-regulation and micro-managing for the sake of winning votes means the consumer loses. When carriers stop offering product and the number of competitors in a market shrinks, prices rise and consumers lose.

Obamacrap does nothing to make health care, or health insurance more affordable in spite of what politicians and misinformed reporters may say.

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