The free market isn't always the best answer.
The Medicare Advantage(HMO's) companies require subsidies because they can't match the cost performance of Medicare. ACA, Obama's plan, reduced Medicare medical costs $500 billion by removing the subsidies.
And for the second act, the effect of MLR is happening right now. Health care reform put a ceiling on overhead and profit. 80% of premiums have to cover medical care. 20% is allowed for profit and overhead. MLR - Medical Loss Ratio. Let me point out that, including the costs of fraud, medicare operates on a 3% of costs budget. Insurance companies are deciding that 20% doesn't leave enough room for profit. I think they should have revised their business plan and adopted the medicare plan. 3% to run the place, 17% for profit. That is very profitable. I wish I opportunities like that. I am glad to have this little x-ray of insurance companies business plans. The little sympathy I had for them was misplaced.
But some are reading this as bad news. I read it as good news. Medicare runs a tight ship, coverage is defined, doctors bill and get paid. Very few arguments about anything. Insurance companies spend a lot of money on executive salaries, lawyers and staff to manage costs. If medicare can do it cheaper and fairer why not expand coverage to everyone? Has your HMO insurance coverage ever tried to jack you up by refusing to pay claims? It happens to a lot of people, myself included.
" Indeed, Aetna estimates that, as a result of failing to meet the MLR requirements in 2011, the company will be forced to pay out 100 million dollars this year to it’s customers."
Think about what this means, Aetna spent $100,000,000 million more than the 20% it was allowed. I think they should recheck their business model, What did they spend it on?
From Forbes magazine
"If an insurance company cannot make money while holding onto 15 to 20 percent of every dollar they take in, why should they continue as a business? Wouldn’t the free marketers argue that if a business model cannot profit on so wide a margin and still offer an acceptable product, the business does not deserve to survive?"
