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  • Side Effects: Future of Private Insurance Rests in Secretary Sebelius’ Hands

    Obamacare requires insurers to meet a federally-specified medical loss ratio.  That is, they must spend a certain percentage of premiums on medical expenses.  The remainder can be used to cover administrative costs and, if there’s anything left, profits.  But if insurers don’t shell out enough in medical losses to meet the requirement, they’ll have to rebate the difference to policyholders

    The idea is to limit insurers’ profits and create incentives to reduce administrative costs.  But it’s not as clear cut as it sounds.  After all, what exactly counts as a medical expense?

    “Is giving patients access to a team of nurses to discuss and monitor their health really an administrative function?” Newt Gingrich and David Merritt ask. “What about a fraud-prevention program that targets criminal providers who endanger patient care?” How Obamacare answers these kinds of questions is vitally important.  If it labels many initiatives like these “administrative costs,” insurers will find it increasingly difficult to stay in business.

    The National Association of Insurance Commissioners (NAIC) has been tasked with defining what is and is not a medical cost.  Jennifer Haberkorn reports for Politico that “top House and Senate chairmen want to include as many items as possible on the administrative side of the ledger, which would make the quota harder to reach.”  But “The NAIC has signaled that it’s not likely to side with the Democrats over where to count federal taxes in the calculation, among other issues.”

    The decision ultimately rests with Health and Human Services Secretary Kathleen Sebelius.  If she adheres to the recommendations from NAIC, she could face the discontent of congressional leadership.  But following them loosely would risk being seen as “playing politics on a highly controversial piece of legislation.”

    A broad definition of administrative expenses could be disastrous for private insurance.  Heritage’s Robert Book writes, “By putting an inflexible ceiling on how much insurers can spend on medical costs and how much they can charge in premiums—without any limit on what cost they could be required to incur—this legislation opens the door to the complete elimination of people’s ability to choose private health plans.”

    If private insurers are forced out of the market, what would be left?  The answer should come as no surprise.  Obamacare includes a placeholder for a public option: health plans offered through the exchanges by private insurers, but ultimately defined by the federal Office of Personnel Management.  It appears that these plans won’t be held to the same rules applied to other :”private” plans—including the rules governing medical loss ratios.

    There’s a lot riding on NAIC’s recommendations and the extent to which Secretary Sebelius follows them.  To learn more, click here.

    Posted in Obamacare [slideshow_deploy]

    6 Responses to Side Effects: Future of Private Insurance Rests in Secretary Sebelius’ Hands

    1. Westport, CT says:

      Seems to me like the insurers brought this on themselves.

      If they would have had more integrity and less greed, things would have been different.

      Personally, I believe that if they want to do business in this country, there are many types of markets to get into with great profits. I've been paying auto insurance for 30 years without ever making a claim. But for health care, a mandated low profit level.

      Otherwise, so sell insurance in Bhurma.

    2. DanJ1, Suburban Detr says:

      If I remember correctly, Obamacare conveniently did not include any costs associated with administering the program in order to keep the cost below a trillion dollars. Thus the exchanges will have a competative advantage in the marketplace since for them medical costs will make up 100% of the premiums because they won't have to pass along any admin costs.

      It's easy to see that Congress' intention all along is to put the private insurers out of business.

    3. X says:

      Well how about the Government mandate a maximum YOU can make or have>

      Would THAT be ok?

    4. Patrick, Dayton Ohio says:

      Stop blaming the insurers. If it wasn't for the fraud going on, charging $45 to the insurance for two aspirin [I was told to not worry about the cost because insurance was picking it up] and charging the insurance company for procedures that I never had [I couldn't say anything to the hospital because it was between them and the insurer, the insurer informed me that it was already paid out by the time I got the notice of benefits]. It isn't completely black and white as one person makes it here and it isn't all about the greed of the insurer. Take the time to learn ALL the facts instead of knee-jerking your reaction.

    5. Mitchell Loebel, Cal says:

      Ayn Rand once reminded us that government only has power over OUTlaws. Make more laws and more people will opt out … voila more OUTlaws.

      This b—— in Washington is creating a dictatorship overnight!

      Net, net … there will be a black market … the market can not be defeated by these thugs.

      How many of you remember "pirate radio stations" in international waters in response to odious laws?

    6. Pingback: » Obamacare vs. the Rule of Law

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