Making Bernie Madoff Proud

By golly this minimum loss ratio thingy sure is working well, said every liberal journalist and health insurance company.

CMS released figures yesterday touting that the minimum loss ratio (MLR) requirements under the Patient Protection and Affordable Care Act saved consumers $500 million that must be paid back in the form of rebates. 8.5 million consumers will each receive a portion of the rebate checks which works out to an average of roughly $60 per person. This is down from $1.1 billion that was paid out last year. If hearing this news gives you the "warm and fuzzies" all over then you probably should stop reading here. For the brutal truth please continue.

This is how PPACA planned for MLR to work. Insurance companies must spend 80% of premium dollars they collect on medical claims. The other 20% goes towards operating costs and profit. If the percentage is less than the required amount then the insurance company must rebate customers the difference. If the percentage is higher then the insurance company simply loses out and has to cut their profit margin.

In 2011 the average single premium for health insurance was $5,222 according to the Kaiser Family Foundation. 80% of this figure, $4,178, must be spent on medical claims meaning the insurance company would retain $1,044. For 2012 this number increased to $5,616. 80% equals $4,492 which gives the insurance company $1,124. So, because of MLR, insurance companies were able to retain an additional $80 per insured person in 2012 versus 2011.

The latest figures available (2010 census) state that 195.9 million people are insured through the private market in the United States. Simple math: 195.9 million x $80 = the insurance industry was able to increase their bottom lines by $15,672,000,000!!!

So, why are we celebrating $60 being returned to 8.5 million people when 195.9 million people paid $80 more?

Only in Congress would this be kind of accounting be considered "savings".