Yesterday I asked “Why are Americans against Obamacare?”, and today I learned another reason. Health insurance companies, which said they were for the Affordable Care Act, were actually (and secretly) giving money to groups that were fighting against it.

Rick Unger at Forbes.com writes :

At the very same time the American Health Insurance Plans (AHIP)—the health insurance industry super lobby—was cutting a deal with the White House leading to its stated support of the proposed Obamacare legislation, they were secretly funneling huge amounts money to the Chamber of Commerce to be spent on advertising designed to convince the public that the legislation should be defeated.

Why would health insurance companies conspire against a law that would bring them 30 million new customers?

The reason is the “MLR” (medical loss ratio) which requires health insurance companies to spend 85% of premiums on claims. The MLR for small group and individual health plans is 80%.  You see, insurance companies don’t want limits put on their profits (or the million dollar salaries they pay their top management).

The MLR rule is in effect already, and health insurance companies are sending rebates to their customers. For 2011, these rebates totaled around $1.1 billion.

Medicare Advantage MLR

Medicare Advantage companies must meet an 85% MLR starting in 2014.  Last year, at a training held by a Medicare Advantage company in Tucson, the company rep boasted that their MLR was 70%. Wow!

The rep was boasting about how his company manages the care of its members – and many of them have chronic illnesses. The company model is successful because their proactive care keeps people stable and out of the hospital. This is a very good thing for their members and for the company profit margin. But is it good for Medicare?

All of this company’s revenue comes from Medicare. The company has a great model. The company makes big profits. But Medicare actually pays them more money for their chronically ill members than for healthy patients – and Medicare is saving no money from this business deal. Starting in 2014, when the 85% MLR requirement kicks in, maybe Medicare will save some money on this deal.

The original premise for Medicare Advantage was that turning Medicare beneficiaries over to insurance companies would save Medicare money. Turns out it was really about making profits (unlimited) for the insurance companies. The Affordable Care Act is one step towards saving money for Medicare . Given the dire forecasts for Medicare’s financial future, who could argue against this? And will the billions of dollars in savings be lost if the Supreme Court throws out all of the Affordable Care Act?

This entry was posted on Tuesday, June 26th, 2012 at 8:15 am and is filed under Health. Tags for this post: medicare advantage arizona, medicare advantage mlr, medicare advantage tucson, obamacare, obamacare supreme court ruling. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.