Friday, July 6, 2012

Health Insurance Refund

If you pay your own health insurance premiums, you may get a nice check in the mail this year.

The GOP continues to pound the Affordable Health Care Act, even if most of its provisions have yet to go into effect.  Now we are told that the "fine" for not buying health insurance is "the biggest tax increase ever!  Ever, ever, ever!"   You know, the GOP in describing tax increases always reminds me of a five-year-old boy describing a circus.  They are prone to exaggeration.

Tax or fine, take your pick.  But it is a voluntary tax if it is one - if you choose not to buy health insurance.  And their math on the "biggest tax increase ever! (Ever, Ever, Ever!)" is based on the flawed concept that ever single person in the United States who doesn't presently have health care coverage will pay the fine instead of buying coverage.

Um, that is sort of a deception, isn't it?  And what did I say about people who lie to you?  Yup, the relationship will go downhill from there.

But in addition to this horrible fine, and the gadwful prospect of not being excluded from a policy due to "pre-existing conditions" and of course the nasty prospect of allowing your children to remain on your policy to age 26, is another horrific nightmare of the Affordable Health Care Act - your refund.

Yes, you will likely get a refund check, if you have been paying your own health insurance premiums over the years.  How much is anyone's guess, and it will depend on your insurer, and how much money the insurer pays in overhead and profits, versus actual health care:

The nation’s health insurance companies will refund approximately $1.1 billion dollars to their customers this summer. It’s one of the new benefits of the health care reform law.

The U.S. Health and Human Services Department expects 12.8 million Americans to get some of this money – although in the majority of cases that refund will be sent to employers.

Under the Affordable Care Act, health insurance companies are required to disclose how much of your premium dollar they actually spend on health care and how much they spend on administration, such as salaries and marketing. In the past, consumers did not have a right to this information.

But here’s the real game-changer: The 80/20 rule. If the insurance company spends less than 80 percent of premiums on medical care it must rebate the excess. For large group plans (the kind provided by companies that employ 50 people or more), health insurance companies must spend 85 percent of the premiums on medical care.

Pretty interesting, huh?  Basically, what they are doing is taking health care and making it like a regulated utility.   You can make money, but only so much.   And since only 20% of your income can be used for overhead and profits, it puts real pressure on the insurance company to squeeze overhead.

Of course, it might work out the opposite way.  If the spend MORE on health coverage, they can make more money.  So there is an incentive to "up sell" the customer for more care, so that they can charge higher premiums, and thus make more money.  The more medical services you receive, the more money you make.  This could backfire in a big way - it does not encourage people to rationalize their own use of medical care.  The hypochondriac is now the insurance company's best customer!

Perhaps that is why the nation's insurance companies are in favor of this new law....

But all that being said, I am not sure the alternative is any better.   Remember, we've had the alternative, for decades now, and seen how it works.   And no, I am not voting for "trust me, I'll fix everything, but I won't go into detail how."   I know a pig-in-a-poke when I see one.

Note:  It appears that my refund will not be very large, as Blue Cross is already a very efficient company.   Others, such as Humana, will be handing out larger checks.