Mandate No! MLR SI!: Heard here frist (sic)
No not the striking down of the mandate part, heck probably a thousand fingers were poised over an equal number of ‘Send’ keys when the ruling came down. Me? I took a shower and started thinking about the practical implications of ACA as it will operate under current law as modified today.
Starting with the MLR. Which you did hear about here first in this AB post from July 2009 HR3200 Sec 116: Golden Bullet or Smoking Gun . MLR stands for Medical Loss Ratio which in the final version of ACA was set at 85% for the Group market and 80% for the Individual market for health insurance policies issued by private insurers. Now ‘Medical Loss’ is itself an interesting term of art, it represents the actual amount of insurance premiums collected ‘lost’ via being expended on actual care paid for under your policy. That is for insurance companies the actual end service being delivered from purchase of their product is from their perspective a dead loss to be reduced. Hence a business model built around denying claims.
MLR minimums start to flip that model on its head. Under the rule if the ratio of premium collected to provider payments issued exceeds 15% or 20% respectively in Group or Individual market the difference has to be rebated to the policy holder. And indeed such rebate checks actually went out this year, this provision having already kicked in. Well after this morning’s ruling that rule will continue to operate until specifically repealed. And it is important, though maybe not as much as I was able to convince Donny Shaw of when he put this post up on Open Congress on Nov 14, 2009 The Most Important Health Care Reform Provision You’ve Never Heard Of. For example Richard Escow of HuffPo and elsewhere is of the opinion (expressed semi-privately to me and some others), that while important MLR can be gamed. And in fact I discuss that somewhat in my original 2009 post, feel free to rip on this in comments. Me? I still think MLR is transformational.
So what things are NOT included as ‘medical losses’? In short: administration, management, and direct profits from operations. (For example gains from retained and reinvested profits would not I think count against the company). Currently a lot of health insurance administration is focused on making sure that people likely to submit claims don’t get signed up and/or denying claims to those who for whatever reason obtain coverage. Well various separate ‘must cover’ ‘no pre-existing condition exclusion’ rules take care of much of the first part, under ACA the companies have little room to just turn customers away. And MLR installs limits on the second part. While companies have an incentive to trim their medical ‘losses’ as close to the minimum as possible, every dollar spent doing so puts a squeeze on the same 15% or 20% of premiums they need to pay management salaries and return profits to shareholders. While every dollar squeezed out of the claims process by increasing efficiency and throughput of claims (i.e. actually paying providers on a timely basis with a minimum of paperwork requirements) leaves that much left over for management and shareholders. Gosh all of a sudden we have a business model based on efficient DELIVERY of services rather than DENIAL of them.
Paging Rusty Rustbelt! And Mike Halasy! Because I would love to see how this argument plays to people from the provider community. Particularly folk who have been on both sides of the overall issue. And of course I welcome comment from everyone else. I have been largely absent from the Health Care Debate since actually passage of ACA, the ball went into the lawyers’ court and I am if anything less a lawyer than I am an economist. But after this morning we are right back in the policy analysis game. To which I say “Put me in coach!”
In a rush to get to my eye doctor, but
I think the insurance companies will get this fine tuned. Some will be paying rebates to consumers this year. More importantly….
Health insurers are passing along the PPACA additional coverage costs to employers, and employers are passing those costs on to employees, so those employees who had insurance before PPACA are getting whacked.
Integrated networks are going to hire (or partner with) private insurers in order to get access to highly sophisticated IT resources. Some private insurers will flip this and start integrated networks.
State exchanges are going to have to contract with private insurers or big data companies to help run the exchanges (I can’t wait until one puts a state exchange call center in Bangalore).
Interesting year.
Hmm. Just wondering, Rusty, whether Health insurers in Massachusetts have been passing along the Romneycare additional coverage costs to employers, and employers there are passing those costs on to employees, so those employees who had insurance before Romneycare are getting whacked.
Dan?
Bruce
20% of what they take in leaves them with more money the more they and the doctors charge. there is no incentive for them to reduce medical costs.
Yes the question would see to turn on the question of whether that extra coverage is for what a third party would reasonably consider medically necessary. If so people not currently covered via existing policies are either going without such care or paying out of pocket. Which in turn implies a stratification based on income much as eye care and dental care tend to be now: the middle class can afford the co-pays, the 1% the total cost, while the working class has to content themselves with Sensodyne toothpaste and $2 ‘readers’ from WalMart. And I would note that even under ACA routine eye and dental isn’t included.
Now that the meta and legal issues of ACA are largely sidelined we can turn to the details of such things as the Acceptable Benefits Package, and whether people are getting ‘whacked’ by being covered for things we would want them to on a simple public health basis. Arguments and analysis obscured by objections from Tenthers to theoretical requirements to buy products almost all of them were already getting.
In reality the Vanguard of the Tea Party Tenthers was not filled by the self-reliant uninsured striking a blow for Freedom. Instead all too many of them just didn’t want to pay extra taxes to cover the young, poor and brown. Few of them were actually proposing to forego insurance themselves.
I think Coberly makes a good point. Is there a counter to it?
That in large part is Escow’s argument. But what it does is. Reate a competitive market based on premium cost. The health insurance company/provider network that can deliver the statutory Acceptable Benefits Package in the most medically efficient AND cost effective way can compete for volume and hence for gross income against those that choose to throw expensive and unnecessary care at enrollees to drive up per enrollee margins.
That is there is room for both a MacDonald’s chain and Morton’s Steakhouse. But you can only buy Morton’s $150 a plate plus wine steaks at like three outlets nationwide. While I am the farthest thing from a free market absolutist markets do operate. And sometimes you just want a Big Mac. Or an X-Ray administered by a RPN and read by an Intern.
See above. And future posts. It’s early days in this post Scotus policy debate, and a lot of obfuscating dust is clearing away. Does the Commerce Clause allow regulation of inactivity? Got me. But as regards ACA this morning’s ruling means I don’t need to give a crap, er I meant weigh in where I have no expertise
Bruce:
I believe if you check the ACA, McDonalds, WalMart, and the few hundred have until 2014 either to improve the mini-healthcare insurance program or drop it. They and others who are operating these plans under waviers will have to do either. In the end and if they drop their plans, the insurees will be in the exchanges obtaining a plan. http://www.factcheck.org/2010/12/health-care-law-waivers/
Hi Jack:
The plan was to use Medicare as the driving force to cut costs in the commercial healthcare industry which will force the issue for private insurers to lower costs. There is more to this than just the MLR. Here is a post from one of the Chicken Little Series which gets into it a tad deeper: http://www.angrybearblog.com/2011/06/medicare-sky-is-falling-part-2.html “The Medicare Sky Is Falling (Part 2)“
Insurance reflects the healthcare industry costs plus whatever (today). When those costs are reduced (not insurance), the insurance will be forced to reduced premiums along the lines as stated by Bruce (MLR and individual ratios by risk). Medicare has been successful in driving it’s costs down to 2.64% as shown by the S&P Healthcare Indices.
I believe you missed the point of the metaphor. Which had zero to do with the match between MacDonald’s mini plan for associates (i.e wage slaves) and the minimum acceptable benefits package under ACA.
Not that the topic is not worth exploring. But maybe you should get Dan to put up your take rather than taking fruitless passes here at mine.
I believe you missed the point of the metaphor. Which had zero to do with the match between MacDonald’s mini plan for associates (i.e wage slaves) and the minimum acceptable benefits package under ACA.
Not that the topic is not worth exploring. But maybe you should get Dan to put up your take rather than taking fruitless passes here at mine.
I believe you missed the point of the metaphor. Which had zero to do with the match between MacDonald’s mini plan for associates (i.e wage slaves) and the minimum acceptable benefits package under ACA.
Not that the topic is not worth exploring. But maybe you should get Dan to put up your take rather than taking fruitless passes here at mine.
So what it boils down to in business terms is that insurers wil have to price compete to get volume in order to make more money. The system is forcing them into the grocery store model with ever decreasing margins. Did I get that right?
By the way, for those of us not utilizing Medicare D for drugs, all ought to be aware that prescription drugs can be purchased on the internet from Canadian pharmacies at truly substantial savings.
Bruce:
I missed the metaphor only because I chose to explain a current issue with the McDonalds of the world and chose to point it out to further clarify where you are going with this. This is certainly an important aspect of the ACA well beyond a majority of the population does not understand or know about today. The minimum level of coverage will help them avoid the tax, mandate, penalty at year end. In any case, the minimum coverage required is not to be confused with the mini programs on waivers today and until 2014.
I would like to hear your take on the minimum insurance required with the ACA. Feel free to lead the way.
Jack:
I see it as more a leveling of the playing field. Insurance companies will become more of a pass through entity. They are losing the ability to manipulate clientle, care, etc. Even within the plans there are different levels of insurance and even risk ratios. It does not stop wiith the MLR.