A Moot Point?

More bad news out this week on the Affordable Care Act.  It’s bad news if you were hoping it gets repealed or ruled unconstitutional.  It is about to kick in another popular provision.

Looks like this is another item to add to the list of benefits the Affordable Care Act offers to consumers that Mitt Romney has vowed to eliminate on his first day in office.  You may add this one right after guaranteed insurability for those with pre-existing conditions and the option to have children covered under the parent’s plan until age 26.  Those would also disappear.

Americans to get $1.3 billion in health care rebates

By Julie Appleby, KHN staff writer

Read the entire article at: http://bottomline.msnbc.msn.com/_news/2012/04/26/11410966-americans-to-get-13-billion-in-health-care-rebates?lite

Millions of consumers and small businesses will receive an estimated $1.3 billion in rebates from their health plans this summer under a provision of the health care law that effectively limits what insurers can charge for administration and profits, a new study projects.

Almost one third of people who bought their own insurance last year will get rebates averaging $127, according to an analysis of state data by the nonpartisan Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

"This alone is not going to make health insurance affordable for large numbers of people, but it is getting excess administrative cost out of the system," says Larry Levitt, a study author.

Under the federal law, insurers must spend at least 80 percent of premium revenues on medical costs or quality improvements; the remainder can go toward administrative costs, sales commissions and profits. If companies set premiums too high, rebates in the form of checks or discounts off future premiums are due consumers and businesses by Aug. 1.

The requirement, aimed at holding insurers more accountable and slowing premium increases, went into effect last year and applies to all health plans, except those offered by self-insured employers. Insurers had criticized the rule as being too strict, while sales agents feared insurers would reduce their commissions. (emphasis added)

The listed objections to the provision in the law are from sales folks who will make less money at the expense of those who require health insurance (pretty much everyone) and insurance companies who stand to have reduced profitability.  If there is an objection based on the fact that Americans will receive less quality care, I haven’t seen it.  Shouldn’t that be the measure by which we judge whether the provision is good or not?

I love this quote from the article that provides the health industry’s perspective:

Still, Alexandria-Va.-based health industry consultant Robert Laszewski says the projected rebates are so small as to count mainly as a "rounding error" that most consumers won't even notice.

Using Laszewski’s view, since $1.3 billion is merely a “rounding error”, I guess the industry won’t miss it.

Mitt Romney has vowed to repeal the law and start over.  This might be out of Romney’s hands by November if the Court makes the point moot.  I wonder if an adverse decision by the Supreme Court this summer that strikes down the law will give the industry the ability to recover these refunds.  That would be a boon to Obama’s chances in that case.  Millions see their scheduled refund of premium being instead pocketed by the for-profit insurance industry.  That won’t play well in Peoria.

Before the Right gets apoplectic  that Big Government is redistributing wealth, discouraging success and amputating the Invisible Hand, here is how Timothy Jost, a professor at Washington and Lee University School of Law, described the rebates in the article:

"The purpose isn't to generate rebates, but to force insurers to align their premiums more closely with their (medical) claims costs.  Each year, premium costs have gone up more than medical costs, so what the rule does is force insurers to be more efficient and, if they charge too much, to give some back."

We have a vested, national interest in affordable quality health care.  This provision of the Act seems reasonable, and like many of the others, will probably be popular once implemented.

As I have said before, and now, we wait.