Google+
Close

The Corner

The one and only.

Hidden Time Bomb



Text  



Avik Roy (great name) has a piece in Forbes today about the medical loss ratio (MLR) requirements in the health-care bill. Roy calls these requirements — that small group and individual plans spend 80 percent, and large group plans spend 85 percent, of premium revenues on medical care — “a hidden time bomb” in the 2,300 page law.

According to Roy, these new requirements will force insurers to scramble to cut costs and redefine services, such as nursing hotlines, as medical expenses in order to meet the mandated targets. If the definitions drafted by HHS officials in the next few months limit the insurers’ flexibility to redefine such services, the insurers will either cut those services or face operating at a loss. Despite the rhetoric about huge profits for insurers, their profit margins are typically under 5 percent. Given this context, he argues, overly restrictive definitions could potentially “end up driving many insurers out of business.”

Roy also makes the important point that “Sebelius and her White House compatriots seem to enjoy demonizing insurers.” Given the administration’s rhetorical treatment of the insurance industry, it would be politically difficult for them to shift gear and suddenly give the insurers some breathing room in the forthcoming regulations. But the consequences could be devastating if they do not.



Text  


Sign up for free NRO e-mails today:

Subscribe to National Review