Rick Ungar exposes what he considers a true “bomb” in the Patient Protection and Affordable Care Act – the medical loss ratio:
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 ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.
Except there’s one problem with that assessment: It’s probably, most likely, definitely wrong. Sarah Kliff explains:
There’s a host of new regulations in the Affordable Care Act that insurance companies disagree with. Some, like the medical loss ratio, are quite likely going to drive down insurance companies’ profits. But none, so far — at least judging from their financial performance — are anywhere close to closing up shop.
That’s because the stock prices for these companies have been doing pretty good. Companies knew this was going to happen when the ACA was passed, and they were relatively okay with it for one major reason: the individual mandate:
Although there’s not a ton for health insurers to like in the medical loss ratio, there’s one part of the law they love: the individual mandate. The requirement to carry health insurance, or pay a fine, is expected to drive 16 million Americans into the private insurance market by 2019. That’s a huge new book of business, and one that insurance companies are actively preparing to absorb by expanding their individual market presence.
One more reason why this is more like a pothole than a bomb:
…most are already close to meeting the new spending requirements in their biggest book of business: Employer-based plans. There, a 2009 Senate Commerce Committee report found insurers spending about 84 cents of every premium dollar on medical costs. Where insurance companies do have trouble meeting the spending requirements is the individual market. The same report found insurers only spending 74 percent of premiums on medical costs for individual plans. But individual plans are a relatively small industry segment, accounting for about 5 percent of 149 million Americans with private insurance.
So let’s go ahead and file this false emergency into the folder of “things not to write an incendiary article about.”
Update: Ungar responds to Kliff’s article here, and I have to say, it’s a pretty weak response.