December 02, 2011

Will an Obamacare 'bomb' force us toward single-payer?

Rick Ungar, a health care journalist who writes for places like Washington Monthly, says an emphatic yes.

First, the bomb. It's not secret, or in fine print. It's the requirement that health insurers spend at least 80 percent of their revenues, or 85 percent for the giants, on actual health care.
That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers’ premium dollars they collect—85% for large group insurers—on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.
This is the true ‘bomb’ contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we’ve seen in quite some time.  Indeed, it is this aspect of the law that represents the true ‘death panel’ found in Obamacare—but not one that is going to lead to the death of American consumers. Rather, the medical loss ration will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.
Ungar notes that today was the day the "bomb" officially exploded, and that, so far, the Department of Health and Human Services has been strict on the rule. (For example, it rejected waiver requests from the states of Indiana and Louisiana earlier this week.) Ungar, in his column, notes that individual insurers have been denied laughable attempts to claim sales commissions as a business expense.

That said, I'm not as sanguine as Ungar about this meaning the end of for-profit private insurers or anything near that. He says:
There is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid.
He neglects some obvious private-sector possibilities, including:
1. Putting salespeople on straight salary;
2. Using computers to "sell" more policies;
3. Jacking rates yet higher, to have a bigger pool for that "80 percent";
4. Insurance company consolidation/takeovers.

That said, Ungar claims that parent companies of many insurers are trying to get out of the business. If that leads to consolidation, it could hurt or help. It could lead to more fraud. It could lead to health insurers "too big to fail." Or to many other things.

So, Ungar may be right, half right or not at all.

Finally, it's absurd to make a prediction like this before SCOTUS has made its highly-anticipated ruling on the bill. And, as much opposition as Obamacare faced, I seriously doubt that the GOP totally overlooked this provision in the bill's writing, or that Obama (given that he doesn't care about single-payer) had the provision put in there as a backdoor attempt at single-payer.

So, contra a Facebook dialogue and other things, I'd prefer not to read into this provision what may well not be there. I'll be glad to be pleasantly surprised, but won't hold my breath.

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