ObamaCare Bomb To End Private Insurers Exploded The Other Day

05 Dec, 2011 by William Teach

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An interesting article over at Forbes from December 2nd, which highlights one of the interesting parts of Obamacare, one that was debated back during the time Obamacare was being pushed over economic policy, but has since been forgotten as people focus on the individual mandate. The article writer, Rick Unger, starts out by telling us that the legislation is not that bad, then

(Forbes) There is, however, one notable exception — and it’s one that should have a long lasting and powerful impact on the future of health care in our country.

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 ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.

As Unger points out, there is no possible way for the insurance companies to continue to operate when they have to spend 80-85% of the money they collect on medical care. It’s a financial impossibility. How do they pay their employees? How do they pay for their property? Pay for the paperwork, much of it increased because of government regulation? Advertise their services? Pay their stockholders? Simply staying in business will be impossible.

Whether you are a believer in the benefits of single-payer health coverage or an opponent, mark this day down on your calendar because this is the day seismic shifts in our health care system finally get under way.

If you thought that the Obama Administration chickened out on pushing the nation in the direction of universal health care for everyone, today is the day you begin to understand that the reality is quite the contrary.

This is no a bug of Obamacare, but a feature. During the long Obamacare debate prior to passage, people said that this measure would kill the private for-profit insurance industry (not too mention the number of people this would put out of work), and that was the point of the measure, like so many others. If there are few or no private insurers, well, then, of course the federal government would have to step in, right?

And lest anyone think the Forbes writer is sympathetic to the insurance companies, alas, no. He thinks it would be great if they all went out of business. This is why, as I’ve said, Republicans/Conservatives cannot focus simply on replacing Barack Obama, but must retake the Senate and hold the House. Obamacare must be repealed before it does too much damage to matter.

Crossed at Pirate’s Cove. Follow me on Twitter @WilliamTeach.