ObamaCare Is Starting To Bleed Insurers Dry
Obamacare's Medical Loss Ratio is hurting health insurance companies, says Sally Pipes in an article today on Forbes.com.
Pipes' article does a good job of summarizing the MLR regulation issue and the effect it will have on health insurers.
Unfortunately this "minimum medical loss ratio" regulation will harm not just insurers but workers and employers too, as they'll face higher prices and fewer choices for insurance.
ObamaCare requires insurance companies to spend at least 80% of premiums received in the individual and small-group markets--and 85% of premiums received in the large-group market--on claims. If an insurer is unable to meet those targets, it must rebate the difference to consumers.
These medical loss ratio (MLR) rules are designed to limit supposedly wasteful spending on administration and profits to 20% in the individual and small-group markets, and 15% in the large-group market. But insurers are hardly profligate. According to Fortune magazine, the health insurance sector is among the least profitable in America--with a mere 2.2% profit margin. That's good enough for 35th place.
Certainly, America's health care system needs to be fixed, but Obamacare is not the answer. Like so many of the "solutions" in Obamacare, the MLR was designed to control prices. To be more accurate, the MLR is a control on profits the intended effect of which is to control prices.
But by squeezing already low profit margins, Obamacare will force insurance companies out of business, which will decrease competition and reduce the options for consumers—ironically raising costs.
The answer is to return to a market-based system where consumers have a stake in making medical decisions based on value and cost.