Download PDF Report >>> Insurers’ Efforts to Shift Admin Costs
Senator Rockefeller recently came out with a report cautioning about health insurers efforts to shift Selling, General and Administrative (SGA) expenses to medical costs. A shift would increase medical loss ratios (MLR) allowing insurers to keep more earnings. Two uncertainties affect predictions. First is how plans are grouped and second is how one computes “medical costs” and “premiums”. Below are reasonable interpretations of the new law that favor consumers, not insurers.
HOW ENROLLEES ARE GROUPED
The first order is to define “group.” The more groups are combined, the greater the opportunity for balancing out gains and losses, which is the whole idea of insurance. Continue reading
Filed under: Analyses, Health Costs, Health Insurers, Health Quality, Healthcare Reform, MLR - Financial Ratios | Tagged: bad blocks of business, federal mandate, large groups, medical costs, medical loss ratio, MLR, Premiums, profitable business, R&D, Selling General and Adminstrative, Senator Rockefeller, SG&A, Small groups | Leave a comment »
Health Reform Trends, Research and Analysis 
Consider Having only two Insured Groups – Self-Insured and Community Rated
Download PDF Report >>> Consider having two insured groups
Anthem’s recent announcement of rate hikes of up to 39% highlights a serious problem with the health insurance industry. Despite public consternation, Anthem can justify the increase using legitimate risk analysis. The problem is not entirely Anthem. The problem is a marketplace in this country that defies logic, and has done so for decades. All private health insurers including Anthem are benefiting from this absurdly inefficient market.
The U.S. is not one single homogeneous insurance market. Rather, it is multi-tiered divided between government and private. Government pays almost 50% of all medical costs for the 30% of population on Medicare and Medicaid. The private market is further divided into self-insured and risk segments, roughly split 50:50 by population.
The self-insured consist of large enterprises that have so many members that it costs more to buy insurance than to pay medical expenses themselves and have insurers only administer claims. Insurers make a profit on administrative expenses, but nothing on medical costs. Medicare operates the same way as self-insured, contracting membership and claims to insurers. Insurers make nothing on any self-insured claims because the insurers carry no medical risk.
Service fees on self-insured groups of the top 10 insurers average 6% of insured premiums. Medicare overhead runs even less. Adding government and self-insured costs, some 75% of all insured U.S. health care is administered with expense ratios of about 5%. Continue reading →
Filed under: Commentary, Health Insurers, Healthcare Reform | Tagged: adverse selection, Anthem, community rated, expense ratios, experience rated, high-risk reinsurance, Medicaid, medical risk, medicare, Modified community ratings, rate hike, risk, risk consequence, risk likelihood, Self-insured, service fees, Wheel of Fortune | Leave a comment »