We are in a transitional time for management of healthcare costs. Last week, I heard a speaker refer to it as “an economic dispassionate force causing the delivery and payment of healthcare to change.” Government regulations, meant to stabilize the market, are likely to have unintended consequences.
One example is the Medical Loss Ratio (MLR) thresholds which limits carrier profitability. Historically carriers have spent a portion of consumers’ premium dollars on administrative costs and profits. MLR requires insurance companies to spend at least 80% or 85% of premium dollars on medical care. Prior to the passage of these regulations, carriers balanced profitability against blocks of business with some clients more or less profitable than others. The limitations of excess profits will cause carriers to adjust plans and pricing to work within the new paradigms – their survival depends on it.
LifeHealthPro recently published an article that offers a quick, but great overview of the types of things that carriers are doing to improve the profitability in the new MLR era where profits are limited.
The five ways carriers can limit care access under the PPACA (Patient Protection and Affordable Care Act) are as follows:
- Doctor Rationing
- Treatment rationing
- Patient Rationing
- Drug Rationing
- Fraud and abuse protection rationing
The last one is really interesting. With MLR, insurers keep 15% - 20% of overall premium. If a carrier stops spending money on fraud and converts that expense savings to profit, claims will climb. This ultimately helps the insurer’s 15% - 20% (a portion of which is profit) grow.
Photo source: arztsamui