The 'time-bomb' Ungar refers to actually 'exploded' on December 2nd, the day this piece first appeared on Forbes. However, Ungar's point is not only still relevant, but the 'bomb' has been widely ignored by the mainstream media. -- JPS/RSN
I have long argued that the impact of the Affordable Care Act is not nearly as big of a deal as opponents would have you believe. At the end of the day, the law is - in the main - little more than a successful effort to put an end to some of the more egregious health insurer abuses while creating an environment that should bring more Americans into programs that will give them at least some of the health care coverage they need.
There is, however, one notable exception - and it's one that should have a long lasting and powerful impact on the future of health care in our country.
That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers' premium dollars they collect - 85% for large group insurers - on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.
This is the true ‘bomb' contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we've seen in quite some time. Indeed, it is this aspect of the law that represents the true ‘death panel' found in Obamacare - but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for - profit health insurance industry.
Why? Because there is absolutely no way for - profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid. If they could, we likely would never have seen the extraordinary efforts made by these companies to avoid paying benefits to their customers at the very moment they need it the most.
Today, that bomb goes off.
Today, the Department of Health & Human Services issues the rules of what insurer expenditures will - and will not - qualify as a medical expense for purposes of meeting the requirement.
As it turns out, HHS isn't screwing around. They actually mean to see to it that the insurance companies spend what they should taking care of their customers.
Here's an example: For months, health insurance brokers and salespeople have been lobbying to have the commissions they earn for selling an insurer's program to consumers be included as a ‘medical expense' for purposes of the rules. HHS has, today, given them the official thumbs down, as well they should have. Selling me a health insurance policy is simply not the same as providing me with the medical care I am entitled to under the policy. Sales is clearly an overhead cost in any business and had HHS included this as a medical cost, it would have signaled that they are not at all serious about enforcing the concept of the medical loss ratio.
So, can private health insurance companies manage to make a profit when they actually have to spend premium receipts taking care of their customers' health needs as promised?
Not a chance - and they know it. Indeed, we are already seeing the parent companies who own these insurance operations fleeing into other types of investments. They know what we should all know - we are now on an inescapable path to a single - payer system for most Americans and thank goodness for it.
Whether you are a believer in the benefits of single - payer health coverage or an opponent, mark this day down on your calendar because this is the day seismic shifts in our health care system finally get under way.
If you thought that the Obama Administration chickened out on pushing the nation in the direction of universal health care for everyone, today is the day you begin to understand that the reality is quite the contrary.
If you believe that the end of private, for-profit health insurance is some type of nefarious step towards a socialist society, then you might want to attend church this Sunday to mourn the loss of health insurers being able to worm out of covering the bills of a cancer patient because she forgot to write down on her application that she had skin acne for three months when she was a teenager.
Of course, those of you who fear the inevitable arrival of universal health care really shouldn't be too fretful. There will always be a for - profit health insurance industry for those who want to pay for it. The only difference will be that those who cannot afford private coverage will also have an opportunity to get their families the medical care that they need.
Everyone wins - except the for - profit health insurers.