Companies are spending hundreds of millions on technology already to cut administrative costs, he said. Instead of buying individual health policies through agents who take up to 10% of the policy’s cost in commissions, consumers will buy coverage online or on the phone, he said, to help meet the law’s requirement that insurers spend 80% of premiums on health-care services.
This is an article about how the private insurers are trying to cope with the new healthcare laws recently found to be constitutional by the Supreme court. One of the many beneficial provisions is that at least 80% of premiums must be spent on actual health-care services. That means that the profits of these private business must come from the other 20%. It seems like a reasonable thing to do to me. But what do I know.
One of the solutions as mentioned here is to cut administrative costs. Buying on-line seems to be the wave of the future. I must admit that I still get my insurance coverage (house/car) through an agent, who happens to be my neighbor across the street. 🙂
I don’t know how big a change this 80% rule has on these companies. I wonder what was the common percentage before this law. But it seems that yet again our government is forcing private business to find the most efficient way of doing things. Now if they would only follow their own advice and seek those same kinds of efficiencies in the public sector! Maybe we need a regulator for our government services as well as our private companies?
Medicare, which along with a supplemental, is now my insurance carrier. I know they are a government agency and that they have the lowest percentage of revenue going to administrative purposes. I hope private carriers are learning how they do it. I also know that Medicare is rife with fraud, much of it coming from people and companies gaming the system. Maybe the regulators need to force Medicare to reduce fraud the same way they are forcing private carriers in reducing their overhead.
What is good for one is certainly good for the other.
But what do I know…..