Friday, November 30, 2012

The Feds Will Administer the Insurance Exchanges for Twice What it Costs to Administer Medicare

The Obama administration just released another set of regulations, the "Draft Notice of Benefit and Payment Parameters for 2014."

Among many other things in the 373 pages, they have announced their proposed assessments to cover the cost of running the federal exchange.

In order for the feds to administer the new insurance exchanges, they have proposed a fee of 3.5% of premium on each insurance policy sold in the exchanges (page 224).

This from the Kaiser Foundation 2011 "Primer" on Medicare:
"The costs of administering the Medicare program have remained low over the years––less than 2% of program expenditures."

Many times over the years I have heard from advocates of a single-payer Canadian-style health plan that Medicare proves the federal government can do it cheaper than the private sector and should therefore take it all over.

So much for the notion that the feds are the model of insurance efficiency.

Under the new health care law's Minimum Loss Ratio (MLR) provisions, insurance companies are limited to no more than 20% of premiums for expenses in the small group and individual markets.

The feds just increased those expense ratios by 18%. And, there are some non-profit health plans that operate on MLRs around 10% in this market––this is a 35% increase in their expenses!

Insurance companies are still going to have to issue policies, send bills to customers, pay the claims, and everything else they have always done. Given that insurance brokers will be part of the exchange, and their commissions took a big hit earlier so the health plans could meet the MLR targets, it is hard to see just where the health plans are going to be picking up any expense offsets. There is only one thing the insurance companies can do with this new fee––add it right on top of the premiums they are already charging.

Maybe we need an MLR rule for the feds.


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