Unintended Consequence of the Affordable Care Act.

[Heywood]

A friend and I were having a discussion today about the ACA. He mentioned to me that under the ACA that a maximum of 20% of premiums paid could go toward administrative costs and profit and that at minimum 80% of premiums had to go toward paying for actual health care. If an insurer only used 70% of premiums toward health care, they would have to issue a refund to those insured.

Presumably the intention of this clause is to limit the insurance companies profits and to lessen an insurance companies incentive to provide less healthcare.

However, I see as a potential unintended consequence of this provision of the law a lessening of an insurance companies incentive to prevent fraud/waste. Without this requirement, every dollar of fraud/waste prevented is an extra dollar of profit(not quite true because it cost money to prevent fraud/waste). Put this requirement in and this is often no longer the case. That dollar you recover/save...well you might not get to keep that....you might have to refund it back to your policy holders.....so why bother?

[Bibliofagus]

They will learn to bother when they find out their competitors who do actively prevent fraud can offer a better deal than they can and all their customers start walking away to get that better deal.

Markets are a bitch like that.

[Minimalist]

However, I see as a potential unintended consequence of this provision of the law a lessening of an insurance companies incentive to prevent fraud/waste.

The intended consequence is to stop insurance companies from sucking money out of the system for the benefit of their officers and stockholders which is about all that fucking insurance companies are good for.

[The Grand Nudger]

Pretty sure that insurance companies didn't -need- any incentives from the government to engage in fraud or waste Heywood. That they might find those incentives anywhere (and apparently everywhere) they choose to look is probably their own issue, don't you think? For the record, I'm sure the smart boys over at the insurance companies have already concocted schemes that would make yours seem like innocent childs play. What we have on our plates here is likely to be little more than the tip of a larger, nuttier turd.

[CapnAwesome]

Unintended consequences? Are you suggesting that career politicians don't have a firm grasp on every aspect of economics and medicine? The thought!

[Jackalope]

Unintended consequences? Are you suggesting that career politicians don't have a firm grasp on every aspect of economics and medicine? The thought!

This year's (completely foreseeable) unintended consequences will be next year's loopholes, of course.

Nah, I'm not a political cynic or anything.

[Heywood]

They will learn to bother when they find out their competitors who do actively prevent fraud can offer a better deal than they can and all their customers start walking away to get that better deal.

Markets are a bitch like that.

My point is that before this government intervention every dollar of fraud and waste saved by the insurance company translated into an extra dollar of profit(if we ignore the cost of looking for fraud and waste for simplicity sake). After this government intervention every dollar of fraud and waste translates at best into only 20 cents of additional profit. The profit incentive to look for fraud and waste diminishes quite a bit.

Its very true that the market force you speak of didn't go away because of this intervention, but it wasn't the only market force in play. Insurance companies may still have some incentive to look for fraud and waste, but those incentives are much weaker now then before this government intervention.

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However, I see as a potential unintended consequence of this provision of the law a lessening of an insurance companies incentive to prevent fraud/waste.

The intended consequence is to stop insurance companies from sucking money out of the system for the benefit of their officers and stockholders which is about all that fucking insurance companies are good for.

The ACA does just the opposite. It mandates that everyone be a customer of the insurance companies. It mandates people purchase coverage they do not need(why should a male be required to purchase a policy for himself that covers maternity?). It re-reimburses insurance companies if they happen to lose money. There is a reason the stock prices of insurance companies have been climbing much much faster than the rest of the market. This law allows the officers and stockholders to suck off more of the nations GDP. This law is blatant corporatism.

[Dragonetti]

The whole purpose is to provide a pool to help everyone. The larger the pool, the cheaper the services will be on average. You are looking for the individual, but need to look at as a whole. Overtime, the price of the products will go down for everyone as it spreads the price over the group and time.

Social Security, Prescription Drug Program (which is worse than ACA), and Medicare/Medicaid are similar programs.

The 80/20 limiting factor is to prevent the limiting of services for profit.

The tax laws have been in a place for a while. Many companies write off their loses.

[The Grand Nudger]

My point is that before this government intervention every dollar of fraud and waste saved by the insurance company translated into an extra dollar of profit(if we ignore the cost of looking for fraud and waste for simplicity sake). After this government intervention every dollar of fraud and waste translates at best into only 20 cents of additional profit. The profit incentive to look for fraud and waste diminishes quite a bit.

Wow...you think they were saints assiduously ferreting out waste and fraud -before- a bill was passed...but all of a sudden they turn into crooks -after-?

The ACA does just the opposite. It mandates that everyone be a customer of the insurance companies. It mandates people purchase coverage they do not need(why should a male be required to purchase a policy for himself that covers maternity?). It re-reimburses insurance companies if they happen to lose money.

They -already- spread the cost out over those who didn't buy (or didn't require) any given option.........that's how they make money, this is business as usual. Just what is it that you imagine insurance companies have been doing all this time. Where did you think the profit came from -before-?

[Losty]

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A friend and I were having a discussion today about the ACA. He mentioned to me that under the ACA that a maximum of 20% of premiums paid could go toward administrative costs and profit and that at minimum 80% of premiums had to go toward paying for actual health care. If an insurer only used 70% of premiums toward health care, they would have to issue a refund to those insured.

Presumably the intention of this clause is to limit the insurance companies profits and to lessen an insurance companies incentive to provide less healthcare.

However, I see as a potential unintended consequence of this provision of the law a lessening of an insurance companies incentive to prevent fraud/waste. Without this requirement, every dollar of fraud/waste prevented is an extra dollar of profit(not quite true because it cost money to prevent fraud/waste). Put this requirement in and this is often no longer the case. That dollar you recover/save...well you might not get to keep that....you might have to refund it back to your policy holders.....so why bother?

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I was wondering where you were off to. Welcome back :hugs: