Tuesday, August 24, 2010

ObamaCare: Eliminating Small Health Insurers


The Assurant 130-person layoff will not be the last. (How's that "Recovery Summer" going for you, folks??)

Compliance with a key provision of the new health reform law could cost the nation’s health insurers far more than most analysts expected, according to a new study by Weiss Ratings, the nation’s only provider of independent insurance company ratings.

Weiss found that companies already complying in 2009 had average net profit margins of only 0.7%, while those not yet complying had average net margins of 6.3%, or nine times more.

Martin D. Weiss, president of Weiss Ratings, commented: “As long as their investment incomes hold up, most large insurers should be able to handle the increased medical expenses expected under the new health care reform. If investment income declines significantly, however, few insurers will be able to comply without debilitating impacts to their bottom line, and ultimately, their financial stability as well.”

As you recall, ObamaCare requires that insurers pay >80% of premiums for claims (meaning that their admin-expense must be 20% or less of premium income.)

In effect, this regulation will be more kind to large insurers than to small ones--and of course, it will force many insurers to: 1) jack up rates to fatten underwriting profits (to establish a reserve against investment losses OR less-than-budgeted investment income); and/or 2) get rid of employees who are not significant contributors to profits.

It's easy to see what is happening here. The objective is to eliminate health-insurers, but it can't happen too quickly. So rather than nuke the entire sector in one shot, Obama will just bleed it to death over a period of years.

1 comment:

Jack Lohman said...

Wow. This rant obviously comes from somebody who has not been the victim of the insurance industry's 20-30% increases in premiums (even when "medical" costs are going up by only 5% per year).

Do you think that they could have laid off people because medical claims are now computerized and automated? And that profits and CEO salaries are more important than employment? And oh, this terrible government; requiring that the industry must actually pay 80% of their revenues toward medical claims!

Where did all of our "compassionate" conservatives go?