From Peter Suderman at Reason.com:
Over the weekend, The New York Times published a report noting that health insurers across the nation are both “seeking and winning double-digit increases in premiums” — this despite the fact that “one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.” …
What’s going on? Why are these rates going up?
Suderman explains how mandated benefits explain some of the increase. He then explains a less obvious culprit: mandatory medical loss ratios. Suderman writes:
The MLR is an accounting requirement which says that insurers have to spend at least 80 percent of their total premium revenue on medical expenses, leaving just 20 percent for administrative costs, marketing, and other non-medical expenditures. Any insurer that fails to meet this target must issue rebates to customers. This year, insurers rebated about $1 billion.
The MLR provision creates two incentives for insurers to jack up health insurance premiums. One is the plain fact that with profit and administrative costs capped as a percentage of premium revenue, the easiest way to generate larger profits is to charge higher premiums.
The other is that the rebate requirement means insurers may need to charge higher up-front premiums in order to protect themselves from the risk of a bad year.
Read more: Is ObamaCare Causing Health Insurance Premiums to Rise? – Hit & Run : Reason.com.
Kenneth Artz, a freelance reporter for The Heartland Institute, writes:
Although President Obama promised that if you like your health care plan you can keep it, a new report shows more than half of all insurance plans for individuals in the United States won’t survive under his health care law.
According to the study from the Commonwealth Fund, published in Health Affairs and conducted by researchers at the University of Chicago and Towers Watson, more than half of the people who had individual health insurance in 2010 were enrolled in plans that won’t pass the new standards set up by Obama’s law.
Read more: Half of Individual Insurance Policies Eliminated By Obamacare | Heartlander Magazine.
The Independence Institute’s Linda Gorman writes:
In a series of papers for the Mercatus Center at George Mason University, Christopher Conover and Jerry Ellig provide evidence to suggest that “the involvement of both White House and high-ranking agency staff” suggests that “the administration likely got the [ObamaCare] rules it wanted written.” To do this, it overrode the normal checks and balances used to ensure that federal regulations impose the smallest possible burden on the private sector. Rather than posting required regulatory impact analyses (RIAs) with interim rules and allowing time for analysis and comment, the White House and its agency heads dictated the rules that would be written, curbed the Office of Management and Budget (OMB) review function, and then simply declared that the interim rules were final.
Read the whole post: Obama Administration Health Care Rule Making Is a Disordered Mess | John Goodman’s Health Policy Blog | NCPA.org.
Sally Pipes writes:
The new CMS figures on health spending are encouraging. But it’s disingenuous for the president and his allies to claim that Obamacare is the reason why. Consumer-directed health plans — not federal government dictates — have helped bring down costs. Obamacare should be expanding them — not regulating them out of existence.
Read the whole article: How High Deductible Plans Lead To Low Healthcare Spending – Forbes.
One of economist Frédéric Bastiat’s best contributions is to explain the “seen and the unseen” in government meddling in economic matters. Recently Bob Semro of the Bell Policy Center (Colorado) relates only the “seen” part of an ObamaCare command that, under certain conditions, requires insurers to send rebates to policy holders. Sounds good, right?
Christopher Conover and Jerry Ellig explain the unseen downside:
What people don’t realize is that there’s a catch to this “free” money. The rebates are required by an obscure regulation in the health care law, called the “minimum loss ratio,” which also contains longer-term incentives for health insurers to increase costs that will be passed along to all of us. Instead of rushing to spend these extra dollars, rebate recipients are better off pocketing it to pay for higher premiums in the future. …
Although health insurers will pay some rebates this year, the cash should be treated as a short-term benefit with a long-term cost. Rebates will likely disappear in the future as the companies become more familiar with the regulation and learn how to game it.
Read more: Conover and Ellig: Health Care Plan Rebates Have Hidden Costs : Roll Call Opinion.
Insurance agents offer many people a valuable service of finding the best price on a the individual insurance plan that best fits their needs. But ObamaCare’s medical loss ratio requirements threaten to drive agents out of business.
Read about it here: MLR Killing Off Business, Hurting Consumers, NAIFA Survey Says.
Via Greg Scandlen and Linda Gorman.
Writing in the Investor’s Business Daily, David Hogberg reports:
A new Obama administration rule could drive out of the market the low-cost, high deductible plans that are supposed to be available under ObamaCare [HR 3590]. That would likely mean a sharp jump in taxpayer subsidies.
The problem stems in large part from contradictions in the hastily written health care overhaul.
Starting in 2012, ObamaCare requires insurers in the individual or small group (small business) market to spend at least 80% of premiums on medical costs, leaving 20% for salaries, advertising, fraud prevention, profit, etc. For large groups, this medical loss ratio (MLR) must be 85%.
Read the whole article: New HHS Regulation Will Endanger HSA, High-Deductible Plans, Make ObamaCare More Costly – Investors.com.
Via the Galen Institute.