ObamaCare Highlights Truth: Insurance Companies Prosper

Whatever one thinks about the nature of ObamaCare, officially called the Affordable Patient Protection and Care Act (ACA), it’s certainly not the foul-smelling, socialistic takeover of the medical establishment as claimed by many right-wing pundits and politicians.

How can one be sure? Easy. If the nation’s health insurance companies supported it, which they did, it’s only because their capitalistic olfactory sensors picked up the scent of massive future profits just down the road, when tens of millions of Americans will be compelled to buy their own health care policies under the law’s individual mandate.

Holding Their Breath — and Noses

Of course health insurers haven’t seen those dollars yet, as that particular provision of the ACA doesn’t go into effect until 2014; right now, they’re simply holding their collective breath. They’re also, very likely, holding their noses because of one particularly malodorous ACA regulation, the so-called “80/20 rule” that has been on the books since January 2011.

What is the 80/20 rule? It’s the provision of the law that is also known as the “medical loss ratio” or MLR. It requires health insurance companies selling plans to individual consumers to spend at least 80 percent of collected premiums on genuine medical claims as opposed to overhead, administration, marketing and profit taking.

And according to a just-published study by the Commonwealth Fund, a nonprofit health care advocacy group, in 2011, the first full year the MLR was in effect, insurance companies were forced to rebate an estimated $1.1 billion to American consumers and further saved them an additional $350 million in premium costs, because they exceeded the law’s required limits.

Rebate Checks and Whining

So, since this past summer, some 13 million U.S. policyholders got a letter from their health insurance companies with an unfamiliar enclosure inside: a rebate check ranging anywhere from $1 to $517. And the insurers can’t get away with cooking the books to make an end run around the MLR, even if they wanted to. The law requires them to publicly disclose to their policyholders precisely what share of total premiums actually goes to medical care.

Naturally, the companies whined about the new requirements. In a statement issued by America’s Health Insurance Plans, an industry lobbying group, they contend that mandates on how much they should spend on medical care belies a basic misunderstanding about the real cause of rising health insurance premiums: It’s the medical costs themselves that are going up drastically, they opine, not the administrative ones.

They also maintain that pressure to lower premium rates might cause some insurers to leave certain market sectors altogether – especially the individual market, where, last year, profit margins declined. It’s an old dodge: If you make us play by any rules we don’t like, we’ll pick up our ball and go home.

Working Out the Details

Funny, isn’t it, how the companies are all for the individual consumer mandate — one that portends to be a windfall for them a few short years away — but bristle at the thought that they too should be required to have some skin in the game?

2013 will be an interesting year as the insurance companies, the states and the federal government work out the details of the insurance exchanges through which individuals and employers will be purchasing policies come 2014, including the prices of those policies.

So don’t be too surprised if a good chunk of the lost $1.45 billion, or even more, is clawed back by the insurers by the end of the individual mandate’s first year. And after that, who knows? Profits smell sweet, and their aroma is hard to rebuff.

After all, the game is still capitalism. And the object is making money, not giving it away.