It sounds good, doesn't it? Even though most of us are insulated from the full price of our health insurance premiums, because they are paid by our employers, we all know that they are expensive - too expensive, even. So the idea that 80% of our premiums going toward medical expenses sounds like we are going to end up getting more bang for our buck. On the face of it, it appears that, if a health insurer is spending more than 20% on costs/profits, that they will have to reduce them in order to comply with the law. Although this not necessarily the case, let us, for the sake of argument, assume that insurers will comply with the law by reducing their non-medical expenses.
Off the top of my head, non-medical expenses include, but are not limited to, administrative costs (people's salaries), infrastructure (computers, office equipment, offices, etc.), fraud investigations, and profits (can't forget those). So, which of these are going to get cut? Profits are the easy answer, but profits for health insurance companies are currently around 3.5%. There isn't much more to cut, there. So, what else is going to get cut? People's salaries? Or should we just reduce the number of people employed in the insurance industry? Maybe we don't need those new-fangled computers (even though they probably make the industry much more cost efficient). Fraud investigations? That wouldn't cause incidents of fraud to rise, would it? When you look at the actual places that cuts would be made, it becomes evident that there might not be all that much fat to cut.
The other way that companies could come into compliance... the easy way for them to comply with this new rule, is to increase the other side of the equation - the amount spend on medical expenses. Rising medical expenses would result in rising premiums, and if the non-medical expenses remained constant, they would become a smaller percentage of premiums. This is certainly not the intent of the new regulation, but it is a likely result of it.
I don't normally make predictions, but if and when this latter scenario plays out, the next move will not be the repeal of this rule, it will be the adoption of even more regulations. If medical expenses increase as a result of an increase in the cost of specific tests and procedures, price controls will be instituted to prohibit their inflation. If insurers start authorizing additional tests in order to cause their medical expenses to rise, regulations will be instituted to limit what tests can be administered for what conditions.
But here is the real travesty. No one voted on this regulation. Not one Congressman. Not one Senator. Every single person that voted for the health care bill in March can honestly say that this is not what they voted for. But they did vote for it. They voted for it because they voted for a bill that said things like "The Secretary shall make such rules..." over and over throughout the legislation. Our legislature, once again, has abrogated their responsibility of creating the law, and handed it over to the executive branch. This is why Nancy Pelosi was correct when she said that we couldn't know what is in the law until they passed the law - because the law wasn't written, even then. In my last post, one of my suggestions to the new Republican majority was to take back the power that they have given over to the executive branch. The more I think about it, the more important I think this is. Congress should pass a law requiring that all executive-enacted regulation must be ratified by the Congress, either within a certain period of time, or, better yet, before it goes into effect. On November 22, 2010, we learned of another piece of the health care bill. It won't be the last, because, eight months after the bill was passed and signed into law, the health care bill continues to be written.
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