I got my check. Did you get your check? You know the one. The refund from the big bad insurance company. The six and a half percent of your premium that they had to return under Obamacare. The check that means that your insurance company spent more than 15% of the premiums that you or your employer paid on administrative costs instead of applying that money directly to health care expenses. My refund check was from United Healthcare, which is the health insurance arm of United Health Group. That means that one of the largest healthcare insurers in this country was not able to meet the goal set by Obamacare, which means, of course, RETURN OF THE TIN HAT LADY! And away we go—
Mr. Obama signed the The Patient Protection and Affordable Care Act into law on March 23, 2010. Now, I know that, if I worked anywhere in the accounting, finance, or legal department of any insurance company, I would make sure that I read every word of that act by the end of June, 2010, at the very least. I would have lots of meetings and discussions with all of my colleagues, and anyone else I could think of who would be in a position to help me to decipher and understand the new law. I would do this despite any rumors of potential repeal of the law, just in case. And once I thought I understood the basic mechanics of the law, and the timing of each provision, I would immediately notify my employer of my findings, and make suggestions that would be appropriate to further the success of the business. For insurance is a business. Despite all of the emotional rhetoric that swirls around discussions of people’s health and health care, and the affordability or not of access to health care, insurance companies are in business to make money. So, my question is, how could this happen?
How is it that, more than two years after the enactment of Obamacare, more than a year and a half after the insurance companies should have known that failure to comply with the provisions of Obamacare would require them to rebate a tremendous amount of money to their premium payers, that day of reckoning did come, and the checks were issued? And not a few checks: the pundits have estimated that almost 16 million premium payers will receive approximately $1.4 billion in refunds. The proponents of Obamacare are cheering that that evil insurance companies have finally gotten their comeuppance, but my question remains, With such an ample lead time, how could the insurance companies have screwed up so badly?
If it costs money to collect and apply premium payments, how much more does it cost to rebate that money? And this was not unexpected. As I said, the insurance companies had more than a year to prepare for this day. They had to count on the fact that the rebate provision would be enforced—in planning for their next fiscal year, they couldn’t rely on the possibility of repeal or that the law would be struck down.
So, if I were running the insurance companies, I’d immediately find a way to reduce my administrative costs, in order to comply with the mandate, so that I would not be in a position to have to explain to my shareholders why I foolishly squandered so much money on rebates, when the fix was so easy. Why didn’t the insurance companies do that? Why didn’t they just fire enough office drones to meet the 85% requirement? They might have had to limp along for awhile with fewer staff, but they would have adapted to the change in circumstances, or if the law were repealed or struck down, it would be easy enough to rehire and replace necessary staff. Instead, they allowed the clock to run out, and were forced to give back more than $1 billion. Ouch! Or so you’d think.
We are supposed to believe that either the people running the insurance companies are incredibly stupid, or they are incredibly incompetent, neither of which attribute I am willing to assign to them. Which leaves me with yet another conspiracy theory, in which the insurance companies willingly set the goal higher than attainable, or higher than they tried to attain. For what possible reason? you might ask. The greedy insurance companies have been forced to give back lots of money. Obamacare is hurting them, and hurting them bad, and letting them know that they don’t have all of the power any more. Oh, really?
When everyone in the country is required to obtain insurance, who do you think is going to provide that insurance? Those same insurance companies will have, by latest count, at least another four million previously vampiric customers who are now required to buy insurance, and up to 30 million more customers, as all citizens of the United States are required to be covered. Quite an increase in the base, and at the measly (in comparison) cost of $1.4 billion.
So the insurance companies are quite willing to be thrown into the briar patch now, scratches and all, in order to more than recoup their losses later on. And we have all bought into the idea that the evil, mean insurance companies have been brought to their knees, turning a blind eye to the reality of the situation because Mr. Obama and his cronies have brought us a small reward for our support of Obamacare. When the proponents of this law say that, as people learn more about it, they like it more, this is what they are talking about: money into citizens’ pockets.
Which, in the end, brings us to that old tale, attributed, among others, to George Bernard Shaw:
Shaw asks a socialite whether she will sleep with him for $1 million dollars (or pounds). She thinks the offer over for a moment, then says yes.
He immediately follows up with, “Will you sleep with me for $1?”
Offended, she exclaims, “What kind of woman do you think I am?”
He calmly replies, “I think we’ve already established that, my dear. Now we’re merely haggling over the price.”
With an average rebate of $127 for individual premium players, and $70-some per person for employers, it seems to me that we’ve set the price pretty low.