Good news or bad? You decide.

[Chris Brady]

A blog on the Obama health reforms, he brings up some interesting details.  Mainly about how the insurance companies should spend most of the money they get from customers, like minimum 80%.

http://www.forbes.com/sites/rickungar/2011/12/02/the-bomb-buried-in-obamacare-explodes-today-halleluja/

Bearing in mind, this is one side of the equation.

[RubySlippers]

Ohhhhhh, lets see they make 15-20% profit on sick people and they will still make money so the issue is?

There is a simple solution to this innovate and come up with new ways to deliver care cheaper.

[meikle]

Ohhhhhh, lets see they make 15-20% profit

That's certainly not what the article says.

It says they have to spend 80-85% of their income from customers on the health care that those customers are paying for.  The other 15-20% is not 'profit', it's 'what we have left to pay our employees with'.

[Iniquitous]

What this is saying is that when an insurance company sells a policy to someone they have to use 80% of the premium that the customer pays towards the customer’s health care costs (which is how it should be) instead of using that money for marketing, overhead (costs they have to spend in order to stay in business - pay for employees, utilities, rent, insurance for their own employees, etc) or profit for their own pockets. This means they have to learn how to keep their businesses solvent without shortchanging those they sold policies to.

If I am understanding correctly, this is the first step towards ending the practice of selling someone an insurance policy and then denying them coverage right at the moment the customer needs it most on some bullshit reason.

I can see both sides here - insurance companies are taking money from people on the promise that they will pay when the customer needs to see a doctor/needs a procedure and they should be held to that promise without having to be forced into doing so. At the same time, they have to be able to stay in business in order to fulfill that promise. Sticky situation.

[RubySlippers]

That's certainly not what the article says.

It says they have to spend 80-85% of their income from customers on the health care that those customers are paying for.  The other 15-20% is not 'profit', it's 'what we have left to pay our employees with'.

Lets see they have a CEO, Board of Directors and the like they are employees so get a salary usually quite good so the issue is again?

And there is nothing that says they cannot offer other options and make money on those I would think alternative medicine, foreign medical care insurance and the like could be used for extra profit as long as not tied to the official insurance package. Just get creative.

For me the 15-20% is to run the program, pay the people running it and other costs seems to me adequete.

[Iniquitous]

You are not understanding Ruby.

Trying to run a business (salaries, insurance, rents, utilities, office supplies, equipment, marketing, IT, etc) would no doubt come up to be a lot more than the 15-20% that is left after they pay what they owe for their customers. And that isn’t even getting into what is left to be considered “profit” for the company. Just because you see the 15-20% being “left over” it is not profit. It is what they have left to pay their bills.

An easier way of looking at this is:

Say I make 1,600 a month. Now, the total of all my bills that I HAVE to pay each month is 1,675. I am now in the red - I am not bringing in enough money to cover what I have to pay out each month. I either have to demand more from my employer for my services or I start losing things I need and I am most certainly not making a profit. The only way I make a profit is if I bring in more than 1,675 a month.

It is the same way for businesses. They have to bring in more money each month than they have to pay out. And if they want to actually make a profit? Then they need to make a LOT more than what they have to pay out.

[RubySlippers]

They just need to innovate its a free market, they can do that. In Switzerland companies cannot make a profit on the basic package of care just enough to cover the costs of care and to operate. But they can extend profit to things added to this basic plan say Mr. Shultze and his family want a plan offering private rooms and alternative medicine they can. In fact the company could offer this and keep half the profits if they can do so and offer the care added in.

And I get it they have to pay the lights and salaries and for other things well good they have that 15-20% left over to administer these costs they might have to cut out bonuses, some perks, find ways to cut costs to administer the plan or something but that is the new law.

The companies will not go broke and have to stop working at health care will they, just won't have profits that is over the operational costs unless they find it some other way. I'm not stupid I get it, I don't see the issue are you and the article saying that this will force these companies out of business?

[consortium11]

I'd need to study everything in more depth but it seems to me a couple of points immediately leap out:

1) Premiums and excesses aren't the only method an insurance company gains a profit. Even with this change in their methodology I see nothing that indicates that any profit they make from a premium (i.e. I take the premium in, spend 80% on medical care and then invest the rest) would also have to be spent the same way. It may lead to a tightening of belts but the companies will probably still exist.

2) Is this change individual or collective i.e. do 80% of all premiums have to be spent on medical care or do 80% of my premiums have to be spent on my medical care or I get a rebate?

3) Likewise, is it year on year or over a wider period? Do my premiums "stack"?

I do see it probably leading to a tightening of underwriting criteria... but that's been a trend in the entire insurance industry across the globe for the last few years.

Also to point out the Swiss example is pretty different. No, the companies can't make profits on the basic packages that are mandated by the government but they can make huge profits on the "top up" packages without any lines in the sand relating to what has to be spent on medical care.

[Iniquitous]

There is every chance it could force the companies out of business.

While some things can be cut to save money on operating costs there are things that cannot be cut. Like base pay - they have to pay the federal minimum wage. They have to have insurance to run their business. And then they are dependent on the costs set by other companies (electric, water, office supplies, IT, janitorial, etc).

Yes, they can charge more for certain additions to the policies. They can also charge more for their services (which in the end hurts the consumer).

As for them being in business without making profit? Who starts a business with the intention of NOT making a profit? Making a profit is the very base reason for opening a business! Sorry, I would not open a business to bust my butt and deal with the stress that comes with running a business if I wasn’t going to make a profit on said business. Not too mention, if I am not making a profit, how the hell am I living?? The profit is the owner’s pay check. So you are saying the owner of the company shouldn’t get paid?

And for clarification, I am not saying I am against this nor am I saying I am for it. I am pointing out that I can see the insurance companies’ side in all this.

[Jude]

In order to start a business in the first place you have to take out loans.  If you expand, you have to take out loans.  A quick list of the things businesses pay for:

- Permits
- Membership in organizations (Chambers of Commerce, for example)
- Interest on loans and/or returns for investors
- Employee benefits, compensation, insurance, and pay
- Taxes
- Website expenses
- Maintaining customer records
- Actually providing their core service (paying for the procedures, facilitating that, talking to the medical profession) *
- R&D (they have to learn about new treatments and decide what to cover and what not to)
- Physical upkeep of property/HQ
- Legal staff
- HR for their employees

I mean, none of that event takes profit into account.  Only the *'d item would count towards the 85%.  Assuming they keep 5% as profits (which is pretty lean for a business), a 10% overhead is extremely rare and hard to come by for any business.

[RubySlippers]

There is not much that can be done the law is the law, they will have to adapt and find a way to make a go of it. But one idea is to set premiums to cover the costs of doing business so in this case if they were charging for a plan $300 a month they could raise it to $400 and that would generate $15-20 more dollars a month as an example. It is a strict percentage so the math is simple and this would be legal.

I would think in the long run this could stabilize costs but premiums would go up, that was expected if I am right about the core debate on this.

[Iniquitous]

People are already having a hard time having enough money to pay for insurance and you suggest raising the cost? Do you pay for your own insurance by chance?

I can tell you this. For me to get insurance from my job - just covering ME - it is $150 a month. This is something I NEED because I am diabetic and NEED to be under the care of a doctor plus take medications every single day of my life. And guess what. I can’t afford it. I am one of the uninsured in this country. I bust my butt anywhere from 40 to 70 hours a week and I cannot afford health insurance.

So the idea that they can ‘just’ raise the cost of their policies is not a valid one.

[Chris Brady]

For the record, I cannot comment on this.  I am Canadian, so our medical care system is quite different.  However, I was and still am curious to see what you guys (Of those of you who are American) have to say on this.

Please continue, and know that I am very much interested in what's going on.

[Serephino]

I don't think they can raise premiums, which I believe is what this was supposed to do.  If they do, then they probably wouldn't be spending the 80% on actual health care.  They can only charge what it's going to cost them to pay your medical expenses, plus 20% extra. 

I would guess that the 80% applies to the average the company pays out a year for everyone.  After all, an average healthy young person doesn't go to the doctor very often, so they wouldn't be able to charge hardly anything.  Although, you'd be surprised at how expensive a tiny little kidney stone can be...

[RubySlippers]

People are already having a hard time having enough money to pay for insurance and you suggest raising the cost? Do you pay for your own insurance by chance?

I can tell you this. For me to get insurance from my job - just covering ME - it is $150 a month. This is something I NEED because I am diabetic and NEED to be under the care of a doctor plus take medications every single day of my life. And guess what. I can’t afford it. I am one of the uninsured in this country. I bust my butt anywhere from 40 to 70 hours a week and I cannot afford health insurance.

So the idea that they can ‘just’ raise the cost of their policies is not a valid one.

I'm uninsured due to cost and a pre-existing condition like you so the idea is not pleasant. But since the whys and wherefores are regulatory the first area to look at is including "necessary administrative costs" to the patiant side of the care in the 80-85% that might help somewhat. I'm not sure what the 80-85% covers under the current rules.

I just pointed out raising premiums is likely one option they have but in most states they would have to allow it under the insurance oversight each state has, there I'm not to optimistic of containment.

[Iniquitous]

As of right now, that part of the bill says that the 80% to 85% is to pay for medical costs only. The article stated that insurance companies were trying to get it allowed for them to say that employees selling the policies to people was part of the 80% to 85% - and the Department of Health and Human Services shot it down (and I agree with the author of the article, they should have). The only thing the 80% to 85% needs to cover IS the medical costs covering what the customer needs. The companies should not be using that money to put commercials on tv, run websites, pay their employees, pay their loans, or anything that is overhead to keep the company running.

[Caela]

This is the trap in the Bill. Like someone else said, most companies cannot run on a simple 10% overhead (allowing for a very lean 5% profit margin) which means you'll likely see a couple of things happening. 1) Major layoffs from insurance companies trying to cut costs, always fun in an already down economy. 2) Insurance companies just saying "F*** it all", declaring bankruptcy and going out of business while they are still ahead and ALL of their employess thus being fired.

In the end this is why a lot of people with private insurance can kiss it goodbye. The politicians said they wouldn't take it away from you and force you onto a single payer plan, if you like your insurance you can keep it...if they can manage to stay in business to provide it.

[Callie Del Noire]

This is the trap in the Bill. Like someone else said, most companies cannot run on a simple 10% overhead (allowing for a very lean 5% profit margin) which means you'll likely see a couple of things happening. 1) Major layoffs from insurance companies trying to cut costs, always fun in an already down economy. 2) Insurance companies just saying "F*** it all", declaring bankruptcy and going out of business while they are still ahead and ALL of their employess thus being fired.

In the end this is why a lot of people with private insurance can kiss it goodbye. The politicians said they wouldn't take it away from you and force you onto a single payer plan, if you like your insurance you can keep it...if they can manage to stay in business to provide it.

I foresee more processing facilities being outsourced. Along with claim processing, accounting, payroll and anything else that can be done more cheaply overseas. But hey, thats the cost of business.. and the execs who authorize it will most likely get bonuses for complying.

[Vekseid]

It isn't 10% overhead. When you're taking money in trust for some purpose, the entirety of that amount is not typically intended to be 'revenue'. Medicare doesn't operate on a 3% overhead because it is the model of efficiency - Taiwan operates on 1% - but because Medicare's purpose is to collect money and expense the vast majority of it directly. It doesn't, itself, buy a whole lot to operate. It needs a few people, and a few materials, but this isn't a hot dog stand where it has to actually have an inventory of things to sell, to buy materials to manufacture things with, etc. It's taking money in trust for some purpose. In Europe, there are companies that do play by these rules, and they do just fine. The author is rather skeptical of their ability to move down from their current 30+% overhead ratings, which in one industry I worked in, would have gotten the owners arrested for fraud.

Of course, they wouldn't have been able to survive with these obscene margins if they didn't have the monopolies they do. And this is far from the only thing wrong with the US health care system, but I don't think many people are going to weep for them.

[Crazy]

I will.  Destroying our insurance industry is the single most damaging blow the socialists could inflict upon this country.  In America we enjoy the best healthcare in the world, by lightyears, and people from all other countries (yes, even Europe) are pouring into the United States for the most up-to-date treatment.  A century ago,  the wealthy might travel by steam power to see a specialist in Paris or Vienna, but today it is Johns Hopkins or Vanderbilt.

This is because our powerful free market has attracted the brightest doctors in the world,  and there is great incentive to research and invent the very best techniques money can buy.  Whatever their overhead,  insurance companies compete for your business - naturally regulating the cost and the services offered.  Once they've gone out of business,  it will be nigh impossible to restart the industry,  and the costs and benefits of medicine will be in the hands of incompetent bureaucrats.

I cannot believe this article in Forbes has the writer cackling with glee as the unlikelyhood of their survival looms near.  Already, he states,  they are seeking other investments.  This is bad news for the healthcare sector,  as Medicare's wasteful spending,  easy fraud,  and outright denial of service demonstrates.

The bomb in Obamacare is the stipulation that anyone who does not purchase $2100 in annual health insurance goes to jail.  Over my dead body.

[Iniquitous]

The bomb in Obamacare is the stipulation that anyone who does not purchase $2100 in annual health insurance goes to jail.  Over my dead body.

I do believe that part was shot down and there will be no jail time - though don't quote me. It's too early for me to remember for sure and I do not have enough time before work to actually research to see if my hazy memory is correct.

[Pumpkin Seeds]

We do enjoy amazing advances in medicine within the borders of the United States.  Marvelous are the technological measures we can take and the skill of our surgeons.  The research in this country is top notch along with the procedures that can be done.  This does not equate, necessarily, to better healthcare overall though.  A heart transplant is a marvelous affair that brings together some of the brightest minds of medicine and involves amazing skill.  Cheaper and better for the patient though to never need the transplant.  Rare trauma aside, most people suffer not from a problem with their very genetics but from their lifestyle.  People flood into this country from other areas in order to receive this stellar treatment, not for the grandness of our healthcare system.  Our system is poor our capabilities great, there is a big difference.

[Zakharra]

I do believe that part was shot down and there will be no jail time - though don't quote me. It's too early for me to remember for sure and I do not have enough time before work to actually research to see if my hazy memory is correct.

No. That has been both shot down and upheld by several courts. It's going to the Supreme Court now and will be examined in this coming year to see if it is constitutional for the US government to make it's citizens  pay, one way or another, for health care. Either you  buy it yourself, or you will be fined for not having it.  That, I believe, is the issue the SC is going to look at.

[RubySlippers]

I will.  Destroying our insurance industry is the single most damaging blow the socialists could inflict upon this country.  In America we enjoy the best healthcare in the world, by lightyears, and people from all other countries (yes, even Europe) are pouring into the United States for the most up-to-date treatment.  A century ago,  the wealthy might travel by steam power to see a specialist in Paris or Vienna, but today it is Johns Hopkins or Vanderbilt.

This is because our powerful free market has attracted the brightest doctors in the world,  and there is great incentive to research and invent the very best techniques money can buy.  Whatever their overhead,  insurance companies compete for your business - naturally regulating the cost and the services offered.  Once they've gone out of business,  it will be nigh impossible to restart the industry,  and the costs and benefits of medicine will be in the hands of incompetent bureaucrats.

I cannot believe this article in Forbes has the writer cackling with glee as the unlikelyhood of their survival looms near.  Already, he states,  they are seeking other investments.  This is bad news for the healthcare sector,  as Medicare's wasteful spending,  easy fraud,  and outright denial of service demonstrates.

The bomb in Obamacare is the stipulation that anyone who does not purchase $2100 in annual health insurance goes to jail.  Over my dead body.

Unless your poor or middle class and still might go bankrupt over the health care bills, do you deny this is a concern for many people? May I ask people from EU nations and Canada do people there go bankrupt over medical debts or if your a low income person you can't get care for say diabetes or other conditions?

And oddly the ID issue rears its ugly head to access health care and government program care you need an ID that is acceptable, what if you can't get one and therefore don't get into Medicaid when it goes off as an income only benefit. Its assured to be at least the poverty line as a cut-off regardless of other factors.

Back to this issue do you want this law repealed or not or just fixed, say the companies could add basic costs to the health care delivery say filing paperwork, deciding what treatements work best at the least cost, cost saving innovations into that end. I feel that if they end up saving 8% of the routine costs of a patiants care and the result is they are not healthy or the condition managed they should get that money as profit in that case. That is how you get companies to do more, innovate the system and alow them fair added profits IMHO but they are not doing that sadly.

[Chris Brady]

I will.  Destroying our insurance industry is the single most damaging blow the socialists could inflict upon this country.  In America we enjoy the best healthcare in the world, by lightyears, and people from all other countries (yes, even Europe) are pouring into the United States for the most up-to-date treatment.  A century ago,  the wealthy might travel by steam power to see a specialist in Paris or Vienna, but today it is Johns Hopkins or Vanderbilt.

I'm going to have to take exception to this.

Actually, no.  You don't.  You have the highest paid healthcare professionals, but most other 1st and 2nd world countries actually have better service and/or equivalently trained doctors and nurses.  Anyone who tells you that America has the best, is trying to sell you insurance so you won't see the truth.