The Democrat screw up on the 80% rule for insurers

Indiana Governor Mitchell Daniels delivers his...Image via Wikipedia
Washington Post:

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Beginning in 2011, insurers must devote at least 80 percent of the premiums they collect to medical claims or other activities that improve customers' health - leaving no more than 20 percent for the insurer's administrative costs or profits. Companies that do not spend enough on the right purposes will have to refund the difference to their customers in 2012.

Consumer advocates have hailed the new "medical loss ratio" standard as a ground-breaking protection against profiteering by insurers. But the law's drafters were concerned that it could prove too onerous for plans selling to individuals, whose customer base is less stable and healthy than those of plans serving small and large businesses. So the law permits states to request temporary adjustments of the standard from the Secretary of Health and Human Services.

According to rules issued by HHS, a state must provide data demonstrating that there is a reasonable risk that the new standard will force a critical mass of insurers to pull out of its individual market, leaving residents who cannot get insurance through their employer with little or no ability to buy it for themselves.

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This rule was a major screw up. The one health care approach that has actually reduced cost and worked for consumers has been health saving accounts where people buy policies that only kick in for catastrophic health care cost. The pay for routine care out of a tax free health savings account that their employer helps to fund. These have been extraordinarily successful where they have been tried including by state employees in Indiana where Gov. Mitch Daniels used them to control soaring health care insurance costs. But since most people never tap the catastrophic insurance they can't possibly meet the 80% test. The test is a self defeating mistake that eliminates one of the real health care innovations.

This major screw up is another reason the health care monstrosity should be repealed.
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