You may have received a refund check in the past few months from your health insurer. This is not your individual reward for staying healthy; it is your insurer’s punishment for making too much money because you did.
Obamacare includes what the health care technocracy calls the “MLR rule” – minimum requirements for medical-loss ratios – or the percentage of premiums collected by health insurers that must be spent on medical care or refunded. The inverse of the MLR is the percentage spent on administration and marketing, and earned as profit. Obamacare sets minimum MLRs of 80 percent for individual and small group plans, and 85 percent for large groups.
Aside from its obvious populist appeal, this profit regulation mechanism signifies a belief, now enshrined in legislation, that health insurance markets do not work. Without such a rule, the architects of Obamacare believe, insurers can name their prices, however inflated, and we all just pay.
In the short term, that is true. Most health insurance plans price only once per year, are subject to long delays in cost trending information and multi-year underwriting cycles, and endure the meddling of a carnival midway’s worth of employee benefits tinkerers, agents, brokers, consultants, and other conflicted middlemen. But in the long term, over multiple annual cycles, premiums do rise and fall, and the health insurance industry’s fortunes with them.
Gregg Masters reports on a recent Kaiser Health News article: Hospitals Look to Become Insurers, As Well as Providers of Care”.
This is the dumbest idea I’ve heard since “I’m going to invest all my money in Facebook’s IPO and get rich!”
Here are six reasons why:
1) You’re too late. Health insurance was an attractive and profitable business in the 00s, but after passage of the Accountable Care Act it’s been commoditized.
First, the health plan business model of the past decade is dead. That model was — “Avoid and shed risk” — or more simply, avoid insuring people who are already sick (preexisting conditions) and get rid of people who become sick (rescissions). Under the ACA, health insurers must take all comers and they can rescind policies only for fraud or intentional misrepresentation.
Second, the ACA institutes medical loss ratio restrictions on health insurers. Depending the the type of plan, insurers now must spend at least 80-85% of premium dollars on paying medical claims; if they spend less, they must return these “excess profits” as rebates to customers. As a result, health insurance has become a highly regulated quasi public utility.
This is why you see health plan CEOs like Mark Bertolini of Aetna declaring “Health insurers face extinction”. The old health insurance model is on a burning platform, and health plans are reformulating themselves as companies involved in health IT, analytics, data mining, etc.
2) You have bigger fish to fry. Focus on developing accountable care capabilities. The AHA estimated that hospitals will need to spend $11-25 million to develop an ACO. Get going.
You know we’ve gone through the looking glass when the hottest health care money on Wall Street is chasing Medicaid.
No, I didn’t mean Medicare, the $560 billion per year federal program for insuring the elderly that has launched a thousand IPOs. The current darling of health care investors is Medicaid, the hybrid federal-state program for insuring the poor that now dominates, and often overwhelms, state government budgets.
Last month, Wellpoint agreed to pay $4.5 billion for Amerigroup, a Medicaid managed care company, representing a nearly 50% premium over Amerigroup’s market price. Not to be outdone, Aetna this past week purchased Coventry for $5.7 billion, which also services Medicaid populations. These deals and several others like them rumored to be in the pipeline have driven up the share prices of Amerigroup’s competitors – other Medicaid managed care companies like Centene and Molinas – in anticipation of the latest round of monkey-see, monkey-acquire deals by health insurers.
We are disappointed that CMS’ recently proposed rules again miss a clear opportunity to address home hemodialysis access for Medicare patients.
Recent clinical research demonstrates the significant benefits of more frequent dialysis. Better clinical outcomes, lower mortality, and higher survival – the list goes on. Recognizing the strength of this data (and heeding the calls of numerous patient advocates), large national commercial insurers, including UnitedHealthcare and Aetna, recently clarified their policies, granting greater access to home, and more frequent, hemodialysis for commercial patients.
In recent weeks, CMS’ proposed rules for both Physician Fee Schedule and ESRD PPS Rule came out. In the proposed Physician Fee Schedule, physician payment will increase for in-center dialysis, but will remain essentially unchanged for home dialysis. Physicians are already paid generally 20% less to care for their home dialysis patients, and under the proposed rule for physician payment this disparity would grow. In the proposed ESRD PPS Rule, there were no mentions of home hemodialysis. None. In the rule, CMS proposes a 2.5% increase to the bundled payment rate, representing hundreds of millions dollars of additional money going to the Medicare dialysis program. None of this increase is going to address the known payment issues impacting access to more frequent home hemodialysis.
I’ve been saying it for years (and in 3D and Technicolor in my new book Healthcare Beyond Reform): The Standard Model of Healthcare (the traditional unmodified fee-for-service, commodified, defined-benefit payment system) is broken and doomed. It’s fascinating to hear that even the CEO of Aetna, Mark Bertolini, said exactly that recently at a major healthcare technology conference — and that Forbes, a bastion of business and the private approach to everything, would publish an article on his remarks.
At Health 2.0 last fall, Bertolini said that he no longer thinks of Aetna as an insurance company, but primarily as an information company. This time, he made these main points:
Today’s headline was “Millions Expected To Receive Insurance Rebates Totaling $1.3 Billion.”
The Kaiser Family Foundation estimates that 3.4 million people in the individual market will receive $426 million in consumer rebates because of the Affordable Care Act’s new MLR rules. In the small group market 4.9 million enrollees will see $377 million in rebates, and 7.5 million people will get $540 million in the large group market.
But take a closer look at the report. Only 19% of those in the large group market will be getting a rebate and that rebate will average $72.31 per person. In the small group market 28% of those enrolled in these plans will get a rebate averaging $76.37. And, in the individual market 31% of consumers who have these plans will get a rebate averaging $126.81.
The Wall Street Journal, citing a Goldman analysis, is reporting that Aetna will be paying out $177 million in rebates. But Aetna has $11 billion in premium so that’s only a 1.6% rebate. UnitedHealth will be paying out $307 billion but that is only 1% of its $28.8 billion in premium. Wellpoint will pay out $94 million in rebates but that is only .28% of its premium for the year.
The average cost of employer-provided family health insurance is now about $13,000 per year. A family rebate of perhaps $200 will amount to only about 1.5% of premium for the relatively few people who will even get one.