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Political News and Commentary from the Right

Obamacare: The House Bill and Obama’s Lies (Part 4)

Today we’ll take a look at what the Democratic authors of the bill benignly titled Subtitle G–Early Investments beginning on page 53.  In just two pages of the monstrous bill, section 161, titled Ensuring Value and Lower Premiums, provides one of the many death blows to the private insurance industry hidden in HR 3200.

Section 161 mandates the Secretary [of Health and Human Services] set the minimum medical loss ratio (MLR) for all health insurance plans.  Specifically, on page 54,

‘‘(a) IN GENERAL.—Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in which the coverage has a medical loss ratio below a level specified by the Secretary, the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of payment sufficient to meet such loss ratio.

First, let’s be clear about what an MLR is.  This is the percentage of premiums collected that is spent directly on providing medical services to policyholders.  For example, if you pay $1000 for your health insurance policy and the insurance company pays out $500 in your claims during the policy year, your policy has a 50% MLR for that year.  That’s an example of the MLR on an individual policy.  It works similarly on a group plan, but the MLR isn’t calculated on specific policyholders within the group, but for the entire group.  So that if an issuer of a group policy that collects $100,000 in premiums for the policy year pays out $50,000 in claims for the group, the MLR for that group is 50%.

So the text of the bill we saw above basically mandates that every private insurance policy issuer must pay a minimum percentage of its collected premiums for medical treatment of its patients in each and every year. In effect, what this does is cap the profit an insurance company can make on a policy or group in any given year.  This may not sound so bad to some who’ve bought into the Democratic demagoguery of the health insurance industry, but let me explain why this is simply another means to eventually do away with private insurance altogether and force everyone into a government-run, single-payer system.

First, anyone who’s ever been in business for themselves knows there are good years and bad years.  In the good years, when everything seems to click, you may make a nice profit.  The next year, you can bring in the same amount of revenue, but everything else may go terribly wrong.  Depending on the business you’re in you may be plagued by equipment breakdowns, lawsuits, product recalls, accidents, or any number of mishaps or market quirks.  In these years, the same amount of revenue that previously resulted in a good profit may not keep you out of the red.  It’s the same in the insurance business.

Let’s say I pay $1000 per year for an individual health plan.  For simplicity let’s say the health insurance company’s administrative costs run 10% of revenue.  So basically, as long as they don’t have to pay out more than $900 in claims on my policy, they’ve made a profit.  Most years, they won’t pay out anywhere near that.  But then one year an accident or a major illness occurs and the company could be out thousands of dollars.  So to make money by selling me an insurance policy, the company has to average taking in more than they spend on my medical bills over several years.  This can’t happen under HR 3200.

The bill mandates that every policy or group suffer a minimum MLR each year.  That means in those good years when policyholders don’t have as many claims as expected, rebates will be issued to bring the MLR up to its government mandated level.  (What was that Obama said about government wouldn’t be controlling health care?)  It’s important to note that nowhere in this bill is there language to allow insurance companies to collect additional premiums in policy years where claims exceed expectations.  Nor is there language to allow those companies to offset one year’s losses with a good year’s gains.  So your insurance company can’t recoup a bad year’s losses in a good year.

Now it doesn’t take a rocket scientist to see this is going to make it virtually impossible for private insurance companies to make a profit over time.  Especially when one considers other mandates in the bill that don’t allow for denial of coverage based on pre-existing conditions, behavior, or anything else, we see that no private company can survive under these regulations.

President Obama has repeatedly claimed this bill won’t result in a single-payer system (after he said that’s what he’s after), he continues to promise you’ll be able to keep your current private coverage if you desire, but these are all lies.  He knows full well this plan will eventually kill the private health insurance industry.  He doesn’t believe that 10 or 20 years from now you’ll still be enjoying the same coverage you have today.  He is well aware that within a few years we’ll all be forced to patronize the single-payer system he and his cronies have longed for.

Our President and his Democratic allies in Congress are lying to you when they tell you any different.

Now I’ll turn myself in as a dissident for publishing this article to save some left-wing Socialist Obamanot the trouble.

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August 6, 2009 - Posted by | Health Care | , , , , ,

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