As a result of the way children are defined in then new law an 18 year old who is legally emancipated from her parents cannot obtain health insurance.
The facts are that just about every expert in the industry has stated that the recent health care reform package will significant drive premiums upward. There are several driving factors, mandated benefits, new compliance mandates, taxes, guarantee issue, and many others.
However the one force that will unintentionally drive premiums upward is the so called mandatory loss ratio or mandatory medical spending requirement. The mandatory loss ratio regulation is complicated but briefly it mandates that insurance have somewhere around an 85% loss ratio. On its face sounds like a good idea to limit the profits that insurance companies make, however, look further. If an insurance company is currently operating with an 80% loss ratio and therefore 20% goes toward administration cost (workers’ salaries, systems, administration, profit to shareholders) then simply passing regulation that mandates an 85% loss ratio will not necessarily make these administration cost go away or reduce them. Unless of course the insurance companies drastically change their services or become incredibly more efficient. I propose that instead that the affect of the new law will have an unintended consequence to clear the way to drive premiums upward by approximately 33% over the next few years.
Why? Consider that if every $1 in insurance premiums 80 cents goes toward medical care and 20 cents toward administration cost. With the new law insurers will be mandated to spend 85 cents on medical expenses for every $1 in insurance premium. This will drive insurance companies to increase premiums to $1.33 so that the mandated 15% will produce enough revenue to cover their original 20 cents of administrative costs. ( $1.33 x 15% = 20 cents). Remember that 20 cents was our original administrative costs but our total premium had to increase to $1.33 to accommodate the new law. Winners: The insurance industry maintains their revenue to cover their administration and profit, the medical providers receive an enormous windfall from a 41% increase in medical spending (changed from 80 cents to $1.13 to accommodate the mandated spending requirement). Losers: Employers and employees by much higher insurance premiums, and self-pay individuals paying much higher prices due to the economic pressures for an increase in demand for higher priced medical services.
Will it work exactly the way I describe above? No of course not. But is it one additional perverse governmental pressure that will send medical spending and premiums in the wrong direction? YES! You want someone in the market place driving medical spending downward. Someone that is trying to hold spending increases down. To date, the only significant force doing this has been the insurance companies, albeit, not very well. But like paying medical providers for units of medical care, where we just get more units of care, not better health outcomes, mandating spending limits of 85% is a bad idea.
Like paying for units of care, mandating upward medical spending limits will only drive medical costs and health care premiums higher.
Yesterday’s ruling by Florida’s Federal District Court (Judge Roger Vinson) has ruled the health care reform law (a.k.a. P.P.A.C.A.) unconstitutional. The lawsuit brought to the courts by 26 states will not be taken lightly. This is a serious challenge to health care reform at all levels. Why? Due to the lack of severability in PPACA, the White House, Congress, federal agencies and cabinets, and all the states now are uncertain about the future of PPACA. The literally thousands of informational workshops and health care seminars conducted around the country about the future of health care may all have all been in vain, including thousands of man-hours devoted to creating interim regulation by the HHS and IRS. Everyone on both sides of the issue are insecure about the future. Those enthusiastically in opposition to PPACA may find their supporting base content to believe that PPACA is a dead issue. Those engaged in the implementation of health care reform will find it difficult to be passionate about their authority that came from PPACA, in the possibility that it will go away.
Provider groups spending millions of dollars to create Accountable Care Organizations and similar investments from new opportunities created by PPACA are now in jeopardy. As are federal and state governments that are spending millions to implement and regulate PPACA.
On page 75 of Judge Vinson’s ruling, he stated that, “since it must be presumed that federal officers will adhere to the law as declared by the court” he presumes that the federal government and White Hose cabinet agencies will cease in the implementation of health care reform as there is a standing precedence that government officials are enjoined from engaging in activities declared unconstitutional by the court. However, Judge Vinson stop short in ordering that continued implementation of PPACA cease.
However, White House Senior Officials say that the implementation of health care will be business as usual.
It is unconscionable to think that our leaders will let this constitutional debate continue for another 2 years in the Supreme Court , as many are speculating. The thought that our political leaders will allow governments to continue to spend millions of tax payer dollars knowing that the constitutionality of PPACA is in serious question would be irresponsible.
No one doubts that the insurance mechanism will work better with everyone in it and each paying their fair share. However, the constitutional issue of mandating people to engage in commerce against their will needs to be resolved immediately and without delay.
There is ample information out there on health care reform, however most have their own agendas or present their own perspective respective to their very own silo. The Henry J. Kaiser Family Foundation does the best job of providing a quick high level time line on health care reform. Use the + and – to open and close relevant subject matter respective to your interests.
