Obamacare Is Not As Simple As Blaming Insurance Companies


TrainwreckI try to avoid major news services for the most part.  In my opinion, all of them have a political agenda they want to push on America.  Since God has given me a fairly good mind, I do not need some entertainer in NY or D.C. telling me what I should think.  In an ideal world, the news media would limit themselves to facts and allow Americans to reach their own conclusions.

Unfortunately, the locker room, where I work out, has a TV tuned to a major news channel.  While I was changing yesterday, there was some ignorant “blow-hard” continuing to spread the misinformation that the reason health insurance premiums are so high is because greedy insurance executives want bigger bonuses.

I am willing to admit that the desire for profit by insurance executives is one of the driving forces behind high health insurance premiums.  However, it is not the only force that is driving health insurance costs up.  To suggest that insurance executives deserve all the blame, shows ignorance of how health insurance works.

BILL PAYING SERVICE

Perhaps it would be easier to think of health insurance as a bill paying service, similar to what you have with your bank.  The difference is that you will use your bank’s bill paying service to pay your utility payments, car payments, mortgage, etc.  Health insurance pays the bills you incur from your doctor, hospital and pharmacy.

You must deposit enough money to pay your debts before your bank will do anything.  Your bank will not pay your bills unless they have reason to expect that your account will have enough money to cover the checks that they write.

Health insurance companies are similar.  Unless they have collected enough money to pay the bills they get from medical providers, they are unable to pay your bills.

STATE LAWS

Most states, I know that the state in which I live, Texas, have had laws for years that require all health insurance companies to collect enough money to pay for all the anticipated medical bills for the year.

When doctors and hospitals increase the amount they charge, health insurance companies have no option but to increase the amount they collect from their members.

MLR

Tucked into Obamacare is a provision called “Medical Loss Ratio” (MLR).  It is a limiting factor on the amount that a health insurance company can charge for health insurance.  It requires health insurance to spend 80% of the money it collects on medical bills.  If they do not, health insurance companies are required to return any excess money to policy owners in the form of a rebate.

The result is that health insurance companies can only use 20% of the money they take in to pay for all of their overhead expenses, like salaries and supplies.  Only money that is left, after all the employees salaries, benefits and other expenses are paid can be used to fund the bonuses for “evil,” “greedy” insurance executives.

The MLR rebates were supposed to show how much “profit” insurance companies were making by inflating the premiums they charged.  It did just the opposite.

When the MLR rebates were calculated last year, and again this year, most Americans were surprised to find that they would not get a refund, even after they had paid hundreds of dollars each month for health insurance.  Those Americans who did receive a refund got, on average, less than $200.

While the MLR was supposed to expose the “greedy” practices of health insurance companies, all it did was prove that the actuaries, who predict how much money would need to be collected so that the insurance companies could pay medical bills, were pretty good at their jobs.

INDIVIDUAL MANDATE

I am not naïve enough to think that the executives at health insurance companies are saints.  After all, I am not a fan of the Individual Mandate.  I think that it is an infringement on American liberty.  I still can’t believe that an American congress has the right to tell the entire population of the nation how they must spend their money.

Unfortunately, health insurance executives were able to convince Barack Obama that without the mandate, they could not guarantee that they would collect enough money to pay for the medical bills of Americans.

BLAME

I know that the executives in health insurance companies are not guiltless, however, there are others who can share in their guilt.

The doctors and hospitals share part of the blame for increased health insurance as well as insurance executives.

After candidate Obama declared a crisis in health care, doctors and hospitals continued to raise their fees.  In the 3 years after the PPACA was passed, medical providers have done little to bring their rates under control.  Bigger hospital systems have eliminated much of the competition by buying out smaller hospitals.  That way the bigger hospitals could charge more for their services.

Many doctors who were previously self-employed have closed their private practices and become employees of large hospital systems.  What that means to that doctor is that he is no longer responsible to set his own fees.  The hospital system sets those fees for him.

The result has been increased costs for medical services.  Health insurance companies have no option but to increase the premium they charge so that they can collect enough money to pay the higher medical bills that are charged by medical providers.

Insurance executives and medical providers are not the  only ones who are to blame for higher health insurance premiums.  Federal politicians can claim part of the blame.

Obamacare requires health insurance companies to pay for things they were not responsible for 5 years ago.  Obamacare, as passed by politicians, adds multiple new benefits, taxes and fees that insurance companies must pay.  In order to pay all of these new expenses, insurance companies have no choice but to collect enough money, in the form of premiums, from members.

Yes, those in power at the insurance companies are not blameless but they are not the only people to blame for higher health insurance premiums.  Americans can blame medical providers and politicians just as much.

In the end, however, finding someone to blame does not solve the problem.  It only inflames the anger of Americans.

A loud, vocal, minority of Americans feel that the PPACA is the solution.  Unfortunately, that minority includes the president of the United States.

FUTURE

Whether the majority of Americans think the PPACA will solve the problems of increasing health insurance premiums is immaterial.  As long as we have B. Obama in the White House, the PPACA will be the law of the nation.

All Americans, not just those with low incomes, will have to find a way to deal with Obamacare for at least 2 more years.

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