Has anyone else noticed a change in attitude from insurers? It seems as though the fight is gone from them. I wonder if it could have anything to do with the 15% limit on profits and expenses. If they can no longer generate 20% or 30% or more by denying claims then there isn’t a good reason to fight every claim. Actually it may be the opposite. Under the 85/15 (80/20 for certain small employers) rule of ACA the insurer has to pay out 85% of the premiums collected to pay for medical care. Only 15% may be retained for administrative costs and profits. If they pay out $85 million in claims they get to take $15 million for themselves. If they fight claims and only pay out half that much then they only get to take $7.5 million. Additionally, every penny they waste in fighting comes out of the profit since it doesn’t go to paying for actual care so they are better off settling discrepancies with the minimum amount of fuss. That will keep administrative costs lower.
More below the Orange Scroll of Progressive Policy:
And what about deductibles? By the same reasoning, this is money that they don’t have a chance to take a cut of. High deductibles are a way to scare people off from seeking care in the first place. If I have no medical expenses then the insurance company makes no profits off of me. I’m good for building up the total pot of money but they only profit when somebody gets medical care. They can probably increase profits by doing away with deductibles all together.
Cherry picking only the customers who are healthy doesn’t make sense under this model either. Lower premiums mean lower profits so healthy clients become the least profitable clients. Taken to the extreme, paying out zero for actual health care means they can only keep zero for their expenses and profits. That company would be out of business pretty quick.
Happier employees may be another benefit. I believe most people really do have some humanity in them. It would be pretty miserable working for a health insurer that told you to do everything possible to deny claims if you wanted to stay employed. That goes for their people manager too. They would be a lot happier if their boss could tell them “The more we pay out in claims the more we make.” The company’s bottom line is then determined by having such good service that they can charge higher premiums and then to come as close as they can to hitting exactly 85% payout. Profit would be determined by hitting the numbers just right. Going over would be a disaster but they would have incentive, especially at the end of the year to pay out enough to bring it in right on target. That’s what good management would look like and should be rewarded for.
Does putting a limit on profits actually make the health insurance industry work better for both customers and employees? Will getting all medical procedures paid for drive up the cost of insurance? If they deny a claim and I pay all of it they get nothing but if they pay they get to keep 15% as profit. As long as premiums pay for it they can continue to increase the size of the pie. Now maybe a company that pays out way too much will charge super high premiums but then fewer people will buy the product. Although there might be incentive for both providers and insurers to run up the costs as a scam it seems like the market should keep that from happening because there will be insurers that want to get more customers by offering lower rates. Stockholders don’t seem to like the idea that their investment can’t make unlimited amounts of money but I’d be ecstatic if I could get a guaranteed 10% return on my retirement investments. Medicare seems to be running fine with less than 5% overhead so this is not unrealistic scenario.
Now that we’ve done it once I have to ask: Are there other industries that should get a cap placed on profits? Health insurance should really be viewed as something that is done for the public good. After all, companies have to get the government to grant them a charter to incorporate. If companies operate in a manner which harms the public good the government should revoke that charter. If the company provides goods or services that are essential to the welfare of the people then it is important that the operation of that company be regulated.