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  • New Regulation Forces Private Insurers to Advertise Obamacare

    Obamacare’s medical loss ratio (MLR) provision began this year and requires insurers in the individual and small-group markets to spend 80 percent of premiums—85 percent for insurers in the large-group market—on medical claims or quality improvements. If the insurer doesn’t spend the required percentage, it must issue a rebate to consumers.

    Earlier this month, the Department of Health and Human Services (HHS) finalized a rule that requires insurers to notify rebate recipients that their rebate is all thanks to Obamacare. In the first paragraph it must state, “This letter is to inform you that you will receive a rebate of a portion of your health insurance premiums. This rebate is required by the Affordable Care Act—the health reform law.”

    The Kaiser Family Foundation estimates that the rebates to customers will range from $76 on average for those insured in the small-group market to $14 on average for those in the large-group market.

    In essence, the new rule forces insurers to advertise for Obamacare. However, this free Obamacare promotion leaves out the real effects of the harmful rule.

    One effect is increased consolidation and decreased competition in insurance markets. Obamacare’s MLR provision will decrease the amount of insurers in the market as it kills start-up insurance companies. In recent testimony before Congress, Heritage expert Ed Haislmaier stated, “The MLR regulations effectively constrain the amount, and delay the timing, of any excess premium revenues that a start-up health insurer could plan to either reinvest in growing its business (say, through additional marketing) or repaying its initial investors.” This means it will take much longer for a new insurer to become profitable, discouraging the creation of one in the first place.

    In addition, existing insurers will likely exit the market. Haislmaier explains:

    [T]he fact that the MLR provisions in [Obamacare] constrain health insurance administrative spending and profitability while its other new insurance regulations increase benefit and administrative costs will certainly discourage companies with other options from continuing to offer health plans.

    Moreover, the MLR rules will encourage insurers to charge higher premiums. As Haislmaier writes, “if an insurer overestimates expected spending on medical care, it must refund excess premiums to policyholders, but if it underestimates expected claims costs, it cannot keep more revenue the next year to recoup that loss.” Thus, insurers will charge higher premiums to decrease the chance of profit loss.

    Another devastating effect of the MLR will be on health savings accounts (HSA). The structure of HSAs is incompatible with the MLR rules as currently written. As a result, the 11.4 million people who enjoy health plans with HSAs may lose their existing coverage.

    While the Obama Administration touts $14 rebates, the American people will continue to be hurt by the MLR rule and the rest of Obamacare until it is fully repealed.

    Posted in Featured, Obamacare [slideshow_deploy]

    11 Responses to New Regulation Forces Private Insurers to Advertise Obamacare

    1. Bobbie says:

      How is this moral, ethical, reasonable or practical when he forces himself on the backs of businesses who mind their own? Total conflict of the president's own words "you can keep what you have" when he's making it impossible. This man is using anything he can forcing our money to push his agenda against our will. This is more dangerous than it is against federal law. Why does the President himself continue to disrespect human decency?

      • @ReformedRep says:

        Bobbie, there is no attack on human decency here.

        • Bobbie says:

          when forces out of our control take over our individual health care from OUR CONTROL it's an attack on human decency! There is EVERYTHING wrong with this, it's unconstitutional! And when private insurance is FORCED to comply with GOVERNMENT INTRUSION in any form is an attack on human decency. EVERYTHING you mention has to do with the government responsibility in OVERSIGHT they intentionally failed to draw in this government manufactured crisis. An INSULT to human decency!

          And since Obamacare was forcefully passed and shoved against the will of the people, there shouldn't be a problem BOWING OUT but unlawful acts TRAPPED US! ARRESTS need to commence!! The term "insurance" and government who manipulates it as a NEED, has been used to take advantage of. It doesn't have to come at a cost! Bring down the medical costs and drs fees that conduct their work vowed to the Hippocratic oath and we can "insure" we're not being taken advantage of!

    2. Stirling says:

      Just annother example of how the progressive liberals don't understand or respect the private sector economics (profit is the lifeblood of business)., destroying any profit margin also destroys the industry, and throws everyone into a substandard healthcare trap. Hopefully the SCOTUS will undo all this nonsense and return us to some reality.

    3. killroy71 says:

      yeah, MLR is a job-killer because there are SO many start-up health insurance companies. It's such a money-maker, people are panting to get into this field.

      But you've got a point about how the letter looks like an ad for ACA.

      However, I dislike the term Obamacare because I know right away what the slant will be. Anybody who starts with that term, I just ignore what they say and move on. As the previous commenter said, it's a matter of respect.

    4. civisisus says:

      it's pretty routine for governments to indicate the name of the statute which authorizes specific actions in communications to people who are affected by the statute.

      this is probably news to heretic-age adherents, who basically are unfamiliar with processes of governance of any kind.

      oh, and by the way the assertion that MLR requirements somehow "hurt" consumers indicates the author may be acephalic.

    5. @ReformedRep says:

      There is absolutely nothing wrong here. Insurers have been blaming all their rate increase, commission changes et al on the ACA in writing since 2010, even when they had nothing to do with the law.

    6. @ReformedRep says:

      "One effect is increased consolidation and decreased competition in insurance markets. Obamacare’s MLR provision will decrease the amount of insurers in the market as it kills start-up insurance companies. In recent testimony before Congress, Heritage expert Ed Haislmaier stated, “The MLR regulations effectively constrain the amount, and delay the timing, of any excess premium revenues that a start-up health insurer could plan to either reinvest in growing its business (say, through additional marketing) or repaying its initial investors.” This means it will take much longer for a new insurer to become profitable, discouraging the creation of one in the first place."

      Your expert Mr. Haislmaier obviously does not follow the industry. There is consolidation and has been for the last 25 years and no new startups. Insurer profits are at all time highs….and insurers are buying other businesses in the TPA and medical practice area with no problem.

      The MLR is one of the linch pins of the ACA as it forces insurers to get more efficient and interoperable electronically which they were not doing on their own and had not over the last 20 years. This little requirement alone willmend up saving billions over time and improve the quality of care.

    7. george says:

      It is absurd to think that requiring insurers to pay out hundreds of millions of dollars will reduce insurance costs, in fact, just the opposite will happen as those cost will just be passed along in the form of higher premiums. Second, suggesting that these rebates will force insurers to become more effieient is complete folly. Think about it, the higher the premiums go, the better off insurers will now be since in theory they can keep 15% of the premium, therefore, why focus on holding down costs? Rather, let it rise.

    8. Bobbie says:

      will my reply to -@ReformedRepub be posted?

    9. Allen in Chicago says:

      As long as medical costs continue to rise faster than inflation, health insurance premiums will continue to rise faster than inflation. Consumers do not understand this. It's not the Health Insurance companies that are responsible, it's the extreme human desire to get well, instead of living in pain, or dying. As long as we have such extreme demand for top quality medical care, there will be doctors, hospitals, Rx providers and equipment manufacturers willing to provide it..albeit at extremely high financial costs. The American public has no clue that the Affordable Care Act does nothing to reduce the cost of medical care.

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