I got a refund from my health insurance company.
This was no small refund. It was close to two months of last year’s premiums.
Of course, it was not just me. Millions of people are getting refunds or credits from insurance companies. It’s one result of the health care reform law.
The nature of the refunds would be a great embarrassment to the insurance industry if consumers understood them better. The new law requires insurance companies to spend 80 percent of health insurance premiums, state by state, on health care and prevention costs. To put it another way, it limits them to a markup of 25 percent.
This has to come as something of a shock to an industry where some of the most successful companies tried to set aside as much as 30 percent of revenue for bonuses, most of which went to executives. They won’t be able to do that when markup is limited to 25 percent.
My insurance company last year took a markup near 50 percent in my state. I was personally part of the reason for their profitability; the lifetime total of my health insurance claims is less than $1,000, and last year, I had no claims at all.
In spite of my favorable history and my insurance company’s embarrassingly high profit margin, it decided I was a high-risk customer and went to some trouble to get rid of me last year. Among other tactics, it started to refuse payments on my insurance policy. This happened after my birthday, so I have to imagine it was because the insurer noticed I was getting older.
It’s easy to imagine an insurance executive telling a mid-level manager to “find a way to reduce the customer count” in a particular state. And obviously, they didn’t come to that decision based on financial stress. They were making a 50 percent markup! Somehow, even that was not profitable enough for them to stomach the level of risk involved.
Health insurance is so expensive that the United States could provide the same level of care to everyone in the country for less than the country pays now in insurance premiums. And get this: the insurance system covers only half of the people. An all-inclusive health care system is politically infeasible right now, so instead, public policy will be pushing insurance companies to act more like a public service. We might hope that this would mean more jobs for health care providers and fewer jobs for insurance marketing specialists who know how to make customers go away. But no. The refund checks mandated by the new law seem to be all we will get right now.
