5 ms·

This article is interesting in the fact that it highlights several real issues, but completely fails to understand the true root causes. "they pay more for hos

This article is interesting in the fact that it highlights several real issues, but completely fails to understand the true root causes. "they pay more for hospitals and doctors so they can just raise premiums..." What kind of crap is that? They can raise premiums without paying more to hospitals. In fact, that would raise their "fat cat" salaries even more.

tialaramex 7y ago
It's about percentages. The law says they can keep a _percentage_ of the premium. If they charge you $1000 maybe they're allowed to keep $100 of that as profit. If they charge $900 they only get $90. So, provide a "better" service and charge $1500 then they get to keep $150. The law used to let them keep whatever they could make, so you'd be right, they could buy $400 of healthcare, charge $1000 for and they've made $600 profit. But the percentage rules mean they'd be told to give you $560 back, they'd only be able to keep $40 in profit. So hence as the article says they choose to spend more so they make more money.
- zip1234 7y ago
  Amazing how good people are at finding loopholes in government regulations.
  - grepthisab 7y ago
    Not a loophole,it was specifically written into the ACA to ensure insurance companies spend money on benefits rather than just pocketing everything. Of course, it also has the effect of making the market hard to enter. See, e.g., Oscar
- makomk 7y ago
  It's worse than that. The ACA limits the percentage of their premium that can be used for all non-medical costs - including the insurers' profits, yes, but also including administrative costs like paying people to investigate potentially fraudulent claims. If they put resources into (say) catching that one guy who was fradulently billing them for workout advice at inflated rates[1], not only does it shrink the pool of money they're allowed to keep as profit, the cost of the investigation comes out of that pool and eats directly into their profits. The Affordable Care Act effectively penalizes insurers for rooting out false or inflated bills. [1] https://www.propublica.org/article/health-insurers-make-it-easy-for-scammers-to-steal-millions-who-pays-you https://www.propublica.org/article/health-insurers-make-it-e...
Someone1234 7y ago
I cannot find that quote in the article. I'm also struggling to follow your post. > They can raise premiums without paying more to hospitals. No, they cannot. The ACA sets out an 80/20 split system. 80% of the premium must go towards medical services, leaving 20% of whatever the premium is for "admin" (e.g. salaries). This has had the unintended consequences of insurance companies trying to raise the cost of medical services in order to increase their slice of the pie.
tanderson92 7y ago
You left out the rest of the sentence: > "....and the more money flows to their bottom lines." The reason is because their profits come as a percentage of what is paid, through the enforced Medical Loss Ratio[1]. There is a clear way to increase profits... [1]: https://www.healthcare.gov/glossary/medical-loss-ratio-mlr/ https://www.healthcare.gov/glossary/medical-loss-ratio-mlr/
5trokerac3 7y ago
It's also a poor understanding of the unhealthy, co-dependent, and borderline malicious relationship between hospitals and insurance companies (there are no fair players). Hospitals will attempt to charge an exorbitant fee for any service (usually 3x or more of what they agree with an insurance company to charge). They do this in an attempt to sucker the uninsured out of money. Then, for us lucky enough to have insurance, the insurance company will reject the charge, saying, "nope, we agreed this would cost $x". The hospital always lowers to the agreed price. You can see all this on your EoB - a hospital once tried to charge me $4500 for a test and the EoB showed the insurance company knocking it down to the agreed $800. If all we did was follow emotional, binary reasoning and rid ourselves of the insurance companies, providers would just rip us all off. You have to fix the whole rotten ecosystem.
alistairSH 7y ago
They can raise premiums without paying more to hospitals. No, they can't. Insurance companies are required to payout >80% of premiums on health care costs.[1] 1 - https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-...
- phkahler 7y ago
  Right, so they will encourage providers to raise prices.
  - keenmaster 7y ago
    Bingo, and that is what’s happening. Insurance companies and providers both benefit from higher prices.
    - phkahler 7y ago
      That's what they call a win-win! BTW a win-win is often a 3 player game and they don't mention how the 3rd one does...
jetrink 7y ago
Not so, since the ACA requires health insurers in the individual and small group market to spending 80 percent of their premiums on medical costs. This creates a perverse incentive wherein the only way to increase profits is to also increase spending.
mlinsey 7y ago
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Medical-Loss-Ratio.html https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-In... The ACA requires insurance companies to spend 80% of premiums on medical care. (Sometimes higher and state law can affect this too). This means that letting prices drift upwards is one of the only ways an insurance company can improve profits, so at least they’re taking a percentage of a bigger pie. They could also go the other direction and focus on reducing costs and going for more market share. But this is very difficult in practice, consolidation in the hospital industry has given many hospitals immense leverage. You can also save by identifying and rejecting unneeded care-but this is extraordinarily difficult to do and makes the customer extremely unhappy even when you’re correct (more like dead or bankrupt if you’re incorrect) as the doctor is telling them otherwise.

tialaramex 7y ago

It's about percentages. The law says they can keep a _percentage_ of the premium. If they charge you $1000 maybe they're allowed to keep $100 of that as profit. If they charge $900 they only get $90. So, provide a "better" service and charge $1500 then they get to keep $150. The law used to let them keep whatever they could make, so you'd be right, they could buy $400 of healthcare, charge $1000 for and they've made $600 profit. But the percentage rules mean they'd be told to give you $560 back, they'd only be able to keep $40 in profit. So hence as the article says they choose to spend more so they make more money.

zip1234 7y ago
Amazing how good people are at finding loopholes in government regulations.
- grepthisab 7y ago
  Not a loophole,it was specifically written into the ACA to ensure insurance companies spend money on benefits rather than just pocketing everything. Of course, it also has the effect of making the market hard to enter. See, e.g., Oscar
makomk 7y ago
It's worse than that. The ACA limits the percentage of their premium that can be used for all non-medical costs - including the insurers' profits, yes, but also including administrative costs like paying people to investigate potentially fraudulent claims. If they put resources into (say) catching that one guy who was fradulently billing them for workout advice at inflated rates[1], not only does it shrink the pool of money they're allowed to keep as profit, the cost of the investigation comes out of that pool and eats directly into their profits. The Affordable Care Act effectively penalizes insurers for rooting out false or inflated bills. [1] https://www.propublica.org/article/health-insurers-make-it-easy-for-scammers-to-steal-millions-who-pays-you https://www.propublica.org/article/health-insurers-make-it-e...

Someone1234 7y ago

I cannot find that quote in the article. I'm also struggling to follow your post. > They can raise premiums without paying more to hospitals. No, they cannot. The ACA sets out an 80/20 split system. 80% of the premium must go towards medical services, leaving 20% of whatever the premium is for "admin" (e.g. salaries). This has had the unintended consequences of insurance companies trying to raise the cost of medical services in order to increase their slice of the pie.

tanderson92 7y ago

You left out the rest of the sentence: > "....and the more money flows to their bottom lines." The reason is because their profits come as a percentage of what is paid, through the enforced Medical Loss Ratio[1]. There is a clear way to increase profits... [1]: https://www.healthcare.gov/glossary/medical-loss-ratio-mlr/ https://www.healthcare.gov/glossary/medical-loss-ratio-mlr/

5trokerac3 7y ago

It's also a poor understanding of the unhealthy, co-dependent, and borderline malicious relationship between hospitals and insurance companies (there are no fair players). Hospitals will attempt to charge an exorbitant fee for any service (usually 3x or more of what they agree with an insurance company to charge). They do this in an attempt to sucker the uninsured out of money. Then, for us lucky enough to have insurance, the insurance company will reject the charge, saying, "nope, we agreed this would cost $x". The hospital always lowers to the agreed price. You can see all this on your EoB - a hospital once tried to charge me $4500 for a test and the EoB showed the insurance company knocking it down to the agreed $800. If all we did was follow emotional, binary reasoning and rid ourselves of the insurance companies, providers would just rip us all off. You have to fix the whole rotten ecosystem.

alistairSH 7y ago

They can raise premiums without paying more to hospitals. No, they can't. Insurance companies are required to payout >80% of premiums on health care costs.[1] 1 - https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-...

phkahler 7y ago
Right, so they will encourage providers to raise prices.
- keenmaster 7y ago
  Bingo, and that is what’s happening. Insurance companies and providers both benefit from higher prices.
  - phkahler 7y ago
    That's what they call a win-win! BTW a win-win is often a 3 player game and they don't mention how the 3rd one does...

jetrink 7y ago

Not so, since the ACA requires health insurers in the individual and small group market to spending 80 percent of their premiums on medical costs. This creates a perverse incentive wherein the only way to increase profits is to also increase spending.

mlinsey 7y ago

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Medical-Loss-Ratio.html https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-In... The ACA requires insurance companies to spend 80% of premiums on medical care. (Sometimes higher and state law can affect this too). This means that letting prices drift upwards is one of the only ways an insurance company can improve profits, so at least they’re taking a percentage of a bigger pie. They could also go the other direction and focus on reducing costs and going for more market share. But this is very difficult in practice, consolidation in the hospital industry has given many hospitals immense leverage. You can also save by identifying and rejecting unneeded care-but this is extraordinarily difficult to do and makes the customer extremely unhappy even when you’re correct (more like dead or bankrupt if you’re incorrect) as the doctor is telling them otherwise.