Cost of Health Care Continues to Rise

[BlueStreak]

My quote was direct "cut and paste" from the article.

Like this one,

"NAIC does estimate that most large and small group health plans will meet the new requirement, thanks to PPACA’s exclusion of state and federal taxes from non-medical costs (and implicitly assuming that the impact on MLRs of the currently uninsured will not be significant). In other words, most group plans are likely to be unaffected—and if AHIP is at all successful, may even be tempted to increase their profit percentages while boasting compliance with the PPACA limits."

NAIC doesn't seem to believe it will be much of a problem.

Dave

[noonereal]

Originally Posted by BlueStreak

My quote was direct "cut and paste from the article.

Like this one,

"NAIC does estimate that most large and small group health plans will meet the new requirement, thanks to PPACA’s exclusion of state and federal taxes from non-medical costs (and implicitly assuming that the impact on MLRs of the currently uninsured will not be significant). In other words, most group plans are likely to be unaffected—and if AHIP is at all successful, may even be tempted to increase their profit percentages while boasting compliance with the PPACA limits."

NAIC doesn't seem to believe it will be much of a problem.

Dave

of course, because this bill wound up being corporate friendly not consumer friendly.

The healthcare industry is laughing all the way to the bank.

[whell]

Originally Posted by noonereal

Correct however administrative costs have nopt gone up and this insane rise has indeed been in profits.

Your facts are incorrect, but that's never stopped you before.

[whell]

Originally Posted by BlueStreak

My quote was direct "cut and paste" from the article.

Like this one,

"NAIC does estimate that most large and small group health plans will meet the new requirement, thanks to PPACA’s exclusion of state and federal taxes from non-medical costs (and implicitly assuming that the impact on MLRs of the currently uninsured will not be significant). In other words, most group plans are likely to be unaffected—and if AHIP is at all successful, may even be tempted to increase their profit percentages while boasting compliance with the PPACA limits."

NAIC doesn't seem to believe it will be much of a problem.

Dave

Well, you do need to:

- understand that insurance companies don't operate in a vacuum, and;
- read the entire article

First, as suggested in the article, many large and small group health plans may be able to will meet the new requirement by raising premiums by repackaging plans and raising rates. However, their customers are already feeling the strain of year over year premium increases. They've responded by increasing cost sharing and reducing coverage. PPACA supporters passed the law because, we were told, that Americans wanted expanded access to affordable coverage. If, after PPACA, the market responds by more aggressive rate increases and reduced or costlier coverage, then PPACA didn't meet its stated objectives. In fact, it is likely going to make the current issues worse.

The other issue that mandated MLR's don't address is where carriers today carry groups whose MLR's are well north of 80%. If carriers are forced to a minimum of 80% in the small group market, its easy to see where these small groups are going to see more aggressive increases than the norm in order to maintain the 80% threshold across the carrier's entire book of business.

The second point is what may happen in the individual health insurance market. For carriers, margins are razor thin in this market. The author makes the point that, for a variety of reasons related to the MLR mandate, a number of carriers may simply choose to exit the individual insurance market. So much for expanded coverage and lower costs.

[d-ray657]

Originally Posted by whell

No, that's not what moving from 95% - 80% MLR means. An 80% MLR does not indicate that a carrier is making 20% net profit on each dollar of premium. It means that the carrier has $0.20 on each dollar of premium to cover operating expenses, including labor costs, and what's left over is profit. Broker commissions alone can bite 6% or more out of each premium dollar.

Now, if you want to talk about profit margin, that's a different subject all together. The average net profit margin in "Corporate America" for the last 25 years or so is about 8%. This does not include 2009, which was a recession year, where you might expect profit margins to shrink. The average profit margin in the insurance industry - all insurance types - is around 6%. Aetna's net profit margin is 5.5%, Humana 3.5%, Kaiser Permenente is 3.4%, Wellpoint 3.0%.

By comparison, Apple Computers net profit margin is 15%, Microsoft is 28%, Kraft Foods is 7.5%, AT&T 10.5.

Are carrier's profit margin's unreasonable?

For Apple, Microsoft and Kraft, that profit margin has to do with their profit above the expenses of making and marketing the product. The insurance companies move cash from one pile to another. I suspect that the profit margin of which you speak doesn't have to do with a return on the insurance companies' investment, but a return on the total proceeds, which considering the amount of cash being moved around, can be a huge real number. I would imagine that the profit on the actual investment in the business, or the profit as a percentage of expenses is much higher than the listed numbers. I expect you will correct me if my assumption is incorrect.

Regards,

D-Ray

[finnbow]

Truth be told, nobody fully understands the impacts of the health care reform bill. All laws have unintended consequences, for better or for worse. One's views of the impacts of the bill are colored either by their own vested interest or their ideology. It may be a great thing, it may suck, and it may be somewhere in between. It'll be years before we know (or think we know), but we still won't agree for the same reasons we don't agree now. Even if it appears to succeed beyond all expectations, will the GOP concede that fact?

For example, did the New Deal help stop the Great Depression or was it WWII? Did Reagan cause the fall of the Soviet Union? Was the Iraq invasion the right thing at the time? We have a better idea now than then, but we still don't agree.

[BlueStreak]

Originally Posted by finnbow

Truth be told, nobody fully understands the impacts of the health care reform bill. All laws have unintended consequences, for better or for worse. One's views of the impacts of the bill are colored either by their own vested interest or their ideology. It may be a great thing, it may suck, and it may be somewhere in between. It'll be years before we know (or think we know), but we still won't agree for the same reasons we don't agree now. Even if it appears to succeed beyond all expectations, will the GOP concede that fact?

For example, did the New Deal help stop the Great Depression or was it WWII? Did Reagan cause the fall of the Soviet Union? Was the Iraq invasion the right thing at the time? We have a better idea now than then, but we still don't agree.

Nicely put.

In other words, I suspect that health reform may cost me more, but I don't care, so long as I see some benefit to myself and others. Some folks don't care about any of that, they just don't want to pay any more whatever the outcome. Or, put more bluntly,---they're cheapskates. The big question is; Will we see increased benefit? I don't think anyone just wants to pay more for the same ol' same ol'. (As they say here, in the Swamp.)

It seems to me that in the (recent) pre-reform debate days, healthcare was costing us more and more every year, to the tune of double percentage digits and all we ever got was less coverage, less people covered and higher premiums. Talk about being charged more for nothing, that's being charged more for less.

Have we as a society forgotten that that's what started this whole thing in the first place?

Maybe we should just go back to bartering chickens? It would only seem to fit right in with the mentality of some. How about that, Whell? What kind of coverage do you think you could get me for a half dozen yardbirds? I'll even personally gaurantee them as "salmonella free".

Dave

[whell]

Originally Posted by d-ray657

For Apple, Microsoft and Kraft, that profit margin has to do with their profit above the expenses of making and marketing the product. The insurance companies move cash from one pile to another. I suspect that the profit margin of which you speak doesn't have to do with a return on the insurance companies' investment, but a return on the total proceeds, which considering the amount of cash being moved around, can be a huge real number. I would imagine that the profit on the actual investment in the business, or the profit as a percentage of expenses is much higher than the listed numbers. I expect you will correct me if my assumption is incorrect.

Regards,

D-Ray

D-Ray - the numbers that I posted were Net Profit numbers for all companies listed. This would be the revenue (from all sources, including interest on funds held for reserves by an insurance company) less expenses. The reserves are the "money moving around" part of an insurance company's portfolio: the cash on hand that a carrier needs to maintain to cover anticipated claims expenses. This money is kept invested as you've suggested, and does create it's own revenue stream. However, the net profit figures include this revenue, less expenses.

[whell]

Originally Posted by BlueStreak

It seems to me that in the (recent) pre-reform debate days, healthcare was costing us more and more every year, to the tune of double percentage digits and all we ever got was less coverage, less people covered and higher premiums. Talk about being charged more for nothing, that's being charged more for less.

Have we as a society forgotten that that's what started this whole thing in the first place?

It is not coincidental in my opinion that the government's encroachment in the health care system has coincided with the increased per capita spending in health care. Medicare changed the marketplace in which health care is delivered, and costs have risen exponentially since. It made the marketplace much larger, and created more demand for medicine. Also, the introduction of the HMO following the Health Maintenance Organization act of 1973, created huge demand.

Health care is subject to the same laws of supply and demand as any other commodity: as demand increases and supply remains static or increases more slowly than demand, prices rise.

http://www.nursingcenter.com/library...icle_ID=630811

http://www.nber.org/digest/apr06/w11609.html

"The overall spread of health insurance between 1950 and 1990 may be able to explain at least 40 percent of that period's dramatic rise in real per capita health spending."

What started this? Dramatically rising costs, and the public's clamor to "fix" it. They turned to the same folks to fix it who fueled the increases in per capita spending (and the resultant increase in health insurance costs), and we'll likely get more of the same.

[BlueStreak]

Originally Posted by whell

It is not coincidental in my opinion that the government's encroachment in the health care system has coincided with the increased per capita spending in health care. Medicare changed the marketplace in which health care is delivered, and costs have risen exponentially since. It made the marketplace much larger, and created more demand for medicine. Also, the introduction of the HMO following the Health Maintenance Organization act of 1973, created huge demand.

Health care is subject to the same laws of supply and demand as any other commodity: as demand increases and supply remains static or increases more slowly than demand, prices rise.

http://www.nursingcenter.com/library...icle_ID=630811

http://www.nber.org/digest/apr06/w11609.html

"The overall spread of health insurance between 1950 and 1990 may be able to explain at least 40 percent of that period's dramatic rise in real per capita health spending."

What started this? Dramatically rising costs, and the public's clamor to "fix" it. They turned to the same folks to fix it who fueled the increases in per capita spending (and the resultant increase in health insurance costs), and we'll likely get more of the same.

So, I take it that chicken bartering is not the answer?

Dave