Medical Loss Ratios are Unhealthy for Consumers

Say you run an auto parts business, and the government suddenly says your combined overhead and profits can’t exceed a certain percentage of revenue.  What would that do to your incentive, or your ability to plan for growth, or your desire to go the extra mile for your clients?  Would you ever ask the government to do this to your industry to “level the playing field” with your competitors?  Hardly.

Say you had a marketing representative for your business.  This person knows the differences, strengths, and weaknesses among the products from your various suppliers and how to optimize value for your clients so they will be happy and buy more parts from your business in the future.  Like most such positions, compensation consists of commissions because nobody should be paid for taking up space.  Now say the government says that these commissions – which must be earned through new and sustained business – must factor into your maximum percentage of overhead and profit.  Guess what?  You just lost your ability to reward your marketing rep for helping your business excel. 

 Enter PPACA.  This 3000 page law, brought to us by the legislators who’ve run up a $14 trillion debt, is mandating how efficient health insurers must be – called Medical Loss Ratios.  Ponder that. 

 Consequently, insurers have no choice but to cut commissions to agents, and that is happening right now.  Yet can you, the consumer, save money if you bypass an agent and purchase health insurance online from the carrier’s site? 

 No.  The premiums are the same.  And it could cost you dearly if you don’t really know what you are getting. 

 Health insurance companies are already regulated to ensure their solvency – ability to pay claims in a worst case situation.  They can’t print money like Uncle Sam does when it needs more.  At the state level there is also a fund that carriers must pay into in case they can’t meet their claims obligations.  So, there are free market forces and a reasonable degree of regulation and reserves to protect consumers.  But that wasn’t enough for Uncle Sam.  PPACA is not health care reform, it is health insurance reform, and it has done absolutely nothing to reduce true costs. 

 We want you to be informed consumers.  You need to know that the government is systematically eliminating our near term incentive to serve you as agents for health insurance.  However, we will continue to serve you with integrity.  At the same time, we will inquire about your overall insurance needs, such as life insurance, disability insurance, dental/vision & cash plans, and estate planning.  We want you as clients.  Health insurance is becoming a loss leader for developing a trusting relationship to fill other insurance needs. 

This is the plain truth.  You expect that from us, and we deliver.