Victory

Perhaps you’ve noticed a recent news article regarding health insurance. I would have thought that it would have been the lead story on all of the major networks, but, instead, it was relegated to the back pages of most newspapers. Nonetheless, it tells of a major victory in the battle for affordable health care.

The Obama administration has unveiled a new rule regulating the health insurance industry. Health insurers must now spend at least 80% of the premiums they collect to actually pay for medical care. Any excess must be returned to subscribers in the form of credits or rebates. For larger groups, they must spend at least 85%. The new rule will go into effect on January 1, 2011.

As I have been saying all along, greed and mismanagement by the health insurance industry has been the single largest contributing factor to the uncontrolled rise in health care costs. For some small business plans, carriers spent as little as 50 cents of every premium dollar collected to actually pay for health care. The other 50 cents went towards administrative costs, marketing, and, of course, executive salaries and bonuses.

The new rules won’t solve all of our problems, but they are a big step in the right direction. Other American industries that manage our money – i.e. banks – are subject to a whole slew of regulations limiting how much money they can make on a transaction. It is only fitting that similar legislation is now being applied to health care insurers.

As a realist, I understand that we will have to wait and see just how effective these new laes are in controlling health care costs. While the insurance carriers are complaining about the new laws, they are not complaining THAT much – and this worries me. We all can be certain that the new laws have loopholes, which will be exploited before the ink is dry on the new legislation.

For instance, I am not aware of anything in the new law that deals with reserve funds. If money dumped into reserve funds can be considered as money being spent on care, then we can expect that all excess profits will simply be dumped into these funds instead of being returned to the subscribers.

We also have to be concerned that the carriers will make drastic cuts in service personnel – the people who actually process our claims – before they consider cutting executive salaries and bonuses. Somehow, I just feel it in my bones that the executives running the carriers will blame these cuts on the new law whilst still taking their multi-million dollar salaries.

Still, this is another step in the right direction – and a major one at that. We can only hope that our government continues to draft similar legislation that addresses the real issues in health care – and works to close loopholes and tighten up the laws that we already have.

Well done, Washington.




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