There is still a myth out there amongst employers that health insurance companies truly want to help companies reduce premiums. Folks, we need to bust this myth and there are two very simple reasons why. The first reason is the rule known as the Medical Loss Ratio (MLR). The government enacted the Medical Loss Ratio as part of the Affordable Care Act.
The rule’s purpose was to cap the amount of revenue an insurance company could rake in for every premium dollar they collect. Well, this thought Makes sense, right? Cap the revenue and health insurance premiums will go down. Well, here’s the problem with the rule. The Government capped revenue at a percentage instead of a dollar amount.
So, aside from selling more product, the only way health insurance companies can increase profit is to allow a $1.00 in premium become $1.10 or $1.15. It’s that simple. If you don’t believe me look at the stock prices of the four big health insurance carriers since the inception of the Affordable Care Act.
Folks, the four health insurance companies, above, are not upset about the Affordable Care Act. These companies are gladly raking in the additional premium dollars you’re giving them every year. Fixing the healthcare budget starts with the realization that insurance company incentives are misaligned with your goals. Different outcomes require different solutions.
Next week, we’re going to talk about the riskiest credit card sitting inside your company today. Have a great weekend!