Thursday, September 23, 2010

qotd: Insurers can't survive on 20% of the premiums?

The New York Times
September 22, 2010
States Ask for Phase-In on Insurance Change
By Robert Pear

State insurance regulators told the White House on Wednesday that health insurance markets in some states would be disrupted unless President Obama gave insurers a temporary dispensation from one major provision of the new health care law.

The provision requires insurance companies to spend at least 80 cents of every premium dollar on medical care, rather than administrative expenses, executive salaries and profits.

State officials said they feared that some companies would withdraw from the individual insurance market next year because they could not meet the 80 percent requirement.

Kevin M. McCarty, the Florida insurance commissioner and vice president of the National Association of Insurance Commissioners, said the new law was causing "a paradigm shift" in the insurance industry, and he predicted: "Some companies' business plans simply will not be successful. There will be some casualties. They either have to adjust their business plans or perish."


And...

Kaiser Slides

Distribution of National Health Expenditures, by Type of Service, 2008

30.7% - Hospital care
21.2% - Physician and clinical services
10.0% - Prescription drugs
5.9% - Nursing home care
2.8% - Home health care
12.9% - Other personal health care
16.5% - Other health spending


CMS, Office of Actuary, National Health Statistics Group:


Comment:  It is mind-boggling to think that 21 percent of our national health expenditures (NHE) are directed to physicians and clinical services, whereas many private insurers are now protesting that they cannot survive on 20 percent of the funds which they control - the insurance premiums that they collect.

Taking a closer look at those numbers, one-fifth of all health expenditures go to physicians and clinical services, whereas these insurers who are having difficulties complying with an 80 percent medical loss ratio are consuming over one-fifth of the funds used only for benefits covered by their plans - not one-fifth of the NHE. In fact, 30.9 percent of private insurance premiums do go to physicians and clinical services.

Since these numbers are more comparable, let's look at them to see the value that we are receiving.

Physicians make most of the decisions on what care their patients receive, thus they are controlling much of spending of the insurance premiums. Not only are they making these spending decisions, they are also providing their professional expertise and clinical skills for which they are compensated - 31 percent of the premium dollars. In a sense, the physicians are making the business decisions of health care spending as an uncompensated additional service - decisions which are very important for the patients' health. 

What about these insurers who need more than 20 percent of the premiums for their own intrinsic needs? They are using two-thirds as much of the premiums as physicians are receiving, but for what? It's not for making decisions on how the funds will be spent; physicians are doing that. Do they really need that much just for claims processing? What other important services do they provide? Taking away our choices by establishing restrictive provider networks? Why should we be paying for a detrimental service that we don't even want?

What's the solution? What will give us greater value? Shall we pay these insurers half again as much and throw out the doctors and have the insurers take over the practice of medicine? Or shall we throw out the insurers and replace them with public stewards who can provide better administrative services at a small fraction of the cost?

What will the White House decide? Let the insurers have as much as the physicians are receiving? Right now they're listening to the whining of the insurers, and single payer advocates are still not welcome.

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