A little-known part of the new Affordable Care Act took effect today. It will require insurers to stop squandering customers’ money on executive salaries and instead focus on actual healthcare spending. Forbes has the report:
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 ration will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.
Ultimately if these changes force some for-profit health insurance companies out of business, so be it. They don’t need to exist anyway. All health insurance companies are middle men that drive up costs. America would be better off if we had a system of not-for-profit medicine. Of course the doctors and nurses will remain well paid, the people that do the actual grunt work, but the unnecessary insurance cartel will be put in its place. I think it’s a little too optimistic to say that insurers are going the way of the dinosaur anytime soon, but it is a step in the right direction to force them to spend a set percentage on doing what they are supposed to do: funding healthcare.