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Comment by ck2 | Hacker News Reader

If only it was health care cost reform instead of insurance reform.

I simply do not understand how the 80% of insurance costs being spent or refunded is going to be true.

If you pay $5000 a year for insurance and you go for one checkup that year - are they going to give you $4000 back?

Somehow I suspect not. And I doubt it covers dental.

Everyone is quick to point out you won't lose your insurance for this or that - but can't they just raise the rate to the point where you miss a payment? Last time I checked your car insurance or life insurance is quick to drop you when you miss a payment or two.

And just like student loans, I suspect costs are going to rise to the point of your maximum insurance coverage.

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No, they don't give you back $4000. They get $5000 from 1 million members and have to justify spending $4 billion. That savings gets passed back to you as a lower rate the following year. The point of 80%, I believe, is to drive the "for profits" out of the industry. With only a 20% margin, once you factor in the overhead, they are going to have to be aggressively lean.

This is the end run around price controls, call it profit controls.

I don't think that's entirely correct. In some cases at least, insurance companies do send a check for the difference. But it is applied in terms of their total revenue and spending, not what they spent on you specifically.

It's just my laymans explanation of how you won't, personally, see a benefit. I've never had a company send me a check except as a refund. Usually the reductions are rolled into the next cycle. But if they are mailing checks that is even better.

It's profit controls for insurers, not for providers, though. It doesn't particularly control delivered costs, except very indirectly (due to the lag between premiums and expenditures).

If provider prices go up, insurers can raise their premiums and still stay at 80%.

They have also liberalized the insurer market, so instead of 1-3 insurers per state you can choose one from CA, NY, or TN. If you get insurance through work it is up to HR to find the best rate. If you go alone you can use the exchanges.

Yep, total misalignment of incentives.

I was with you until the "only 20% margin" bit. That's a great multiple for most industries that aren't software. On here, we all think that's horrible, but for a non-software business, that's great. I guess you could argue that health insurance should in practice be as scalable as software and is essentially a software business, but we all know it's not, at least not today.

If they take in $100 Billion, that means they can pay out $80 Billion and still have $20 Billion in profit.

You think $20 Billion in profit is going to hurt them?

Do you actually think the callcenter and data processing jobs are going to be in the USA? I would bet there is absolutely no law requiring those jobs to be domestic.

No, they can't keep the whole 20 billion as profit. They still have to pay for administration, marketing, etc.

And an awesome example of unintended consequences. Now the only way to increase your profit as a insurance company is to spend more - so there is no incentive for them to bring the costs they pay down.

Writing laws that mess with markets without just making everything worse is _hard_.

> Now the only way to increase your profit as a insurance company is to spend more

Or get more customers, or lower costs.

If they start charging more, then unless there is collusion or price fixing, wouldn't people move to a cheaper plan?

When it comes to insurance "profits" I think the public is less than concerned. This will be a problem for incumbents but I'm fairly sure some new upstarts (the other part of ACA was lowering the barrier to entry) will find a way to make money off that 20%.

And finally, you can always run your company as a non-profit, like Kaiser.

I believe the 80% figure refers to 80% of the insurance company's annual revenue, not 80% of the premiums you specifically have paid to them.

Not sure why you don't just look up the answers to your questions?

For example, rebate checks have already been sent out to millions of people:

http://abcnews.go.com/Politics/obamacare-health-insurance-re...

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