Another Reason Health Care Costs So Damn Much

Because insurers are overcharging us.

You read about it all the time:  Obamacare has driven up health insurance costs.  To be sure, health insurance premiums continue to rise, although it’s not clear that they’ve risen because of Obamacare.

They’ve also risen because insurers are overcharging us.

The Curmudgeon recently received a letter from his health insurer (he won’t say which one because he suspects his insurer is by no means the only one sending out such letters and therefore thinks it would be unfair to single out just one insurer) with the following explanation:

In 2017, you were covered by a [name of insurer] plan with your current employer.  The ACA law [Affordable Care Act, often referred to as Obamacare] states that we must spend at least 80 percent of the premium collected from your employer on health care services and programs to improve quality and patient safety.

In 2017, we did not meet the minimum Medical Loss Ratio standard of 80% as claims paid in 2017 were less than expected.

That’s right:  federal law says health insurers must spend at least 80 percent of the premiums they collect on actual health care and these folks didn’t.

So what did they spend it on?

They do, of course, have to spend money to run their companies and administer their claims – but more than 20 percent of the premiums they rake in?  People like to complain about government inefficiency but Medicaid’s administration and overhead costs currently are seven percent.  And Medicare?  That number is harder to pin down because Medicare shares some costs with social security, but it’s almost surely less than ten percent.

And private insurers?  They generally run between 12 percent and 18 percent.

So when your health insurer writes to inform you that it spent more than 20 percent of your premium dollar on itself and not on you, it’s only natural to wonder what they’ve been spending it on.

Seven-figure salaries for executives.  Lavishly appointed offices in palatial buildings. Additional money for their ten-figure “reserves.”  More seven-figure salaries for executives.  Executive retreats held in places like the Virgin Islands. In the case of for-profit insurers, dividends for shareholders.

But not on health care for you.

The letter The Curmudgeon received from his insurer whines, in two places, about being forced by federal law (the evil Obamacare) to disclose its gross overcharges to its customers.  The Curmudgeon isn’t writing this to sing Obamacare’s praises but it’s hard not to think that forcing insurers to reveal publicly that they’re profiteering at our expense is a good thing – because it is.

Health insurers overcharging people for insurance: just another reason why health care costs so damn much.

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