Better Benefits Less Cost

I am often approached by people who say that say they are excited that in 2014 healthcare reform will provide better plans for less money. I assume that by better plans they mean more benefits.

When I hear that I simply scratch my head. Insurance is a risk pool, which means that lots of people put in a little amount of money to cover large expenses for a few. As far as health insurance goes I hear that only about 8% are the heavy users that account for over 90% of the costs.

The Affordable Care Act has already set the Medical Loss Ratio (the amount insurance companies can use to administer policies) at 20% for individual and small group plans and 15% for large groups plans. With that in mind, premiums are continuing to rise. And when you hear about rebates (normally in other states) they are far less that the annual premium increase. 

Then if you increase the benefits that are being paid out by the insurance company, what will happen to premiums? They have to go up.

The solutions are getting more healthy (not using benefits) people into the system or reduce benefits paid (reduced services or reduced payments to providers). We will discuss getting the healthy to buy insurance and reducing payments in the future blogs.