Controlling The Insurers

By Author: Marcus Stalder
Total Articles: 491
Comment this article

If you live in a capitalist society, this suggests you are in favor of capitalism. That's the idea people save their money, invest it as capital into a business and then either take the profit or enjoy the dividends. In other words, you are in favor of the few successful entrepreneurs supplying goods and services, and being able to get rich. In theory, this "land of opportunity" approach to life is motivating. People see they can, literally, rise from rags to riches through their hard work. This is the ultimate upwardly mobile society you could ever want to live in. Except it all depends on there being no real limits on the amount of profit people can take from their businesses. So, if you can buy in goods for $1 per unit, there's nothing to stop you selling them on for $100. Ah, the free market people have just jumped up, waving their fists in anger. They all protest the customers would all revolt and take their business to the sellers asking only $10 per unit. The businesses that overprice will all be driven into bankruptcy. Except that's not what happens. Most businesses parallel each other when it comes to prices, or aim ...
... to be the price leader and increase the prices to suggest a better product or service. Capitalism only benefits the customer where the competition is real.

In most other countries around the world, there are codes of business ethics to limit the profit margins. Where voluntary self-regulation fails, the socialist governments either impose price controls on essential goods and services, or offer subsidies to keep the prices down. This perspective sees the customer as having rights to a fair deal. Companies in these countries either limit their profit-seeking or run the risk of penalties.

With this in mind, we come to our own National Association of Insurance Commissioners (NAIC). Working within the framework produced by Obamacare, the NAIC intends to make insurers more accountable by forcing them to spend a minimum amount of the premium income they collect on medical costs. Surely, as customers of the healthcare industry, we want to see as much of our premium spent on delivering quality treatment? Ah ha! If we do, then we are for a policy that limits the amount of profit an insurance company is allowed to make. We are against the excesses of unrestrained capitalism and all for socialism! So the NAIC is working on a formula to require every insurer to spend not less than 80 cents in every dollar collected on our health care. This increases to 85 cents for the large group plans.

Not surprisingly, the health insurance industry is up in arms, bitterly claiming the right to spend the premium revenue on their own pay, giving away generous dividends, and only spending whatever is left on our healthcare. You will understand, the NAIC is not introducing rules to provide cheap health insurance. The intention of the Affordable Care Act is to give us, the customers, better value for money. At present, we do not know when we are being gouged. If the NAIC prevails, insurers will be limited to 20% to cover their costs and leave a profit. That sounds about right.