New Legislation Would Pad Health Insurance Coffers While Screwing Over Consumers

As part of the Affordable Care Act, health insurers must spend at least 80% of the money they earn from premiums on actually providing health care, with the remaining cash used to cover all administrative, advertising and payroll costs. Those insurers with plans that don’t follow this ratio are soon supposed to start giving the extra money back in refunds and discounts. But new legislation introduced in the Senate this week could jeopardize this, while giving insurance companies even more money to stick in their dog pillows.

The bill, introduced by Senator Mary Landrieu of Louisiana and co-sponsored by John Isakson of Georgia, Lisa Murkowski of Alaska and Nebraska’s Ben Nelson, is intended “to preserve consumer and employer access to licensed independent insurance producers,” by eliminating insurance broker commissions from the administrative overhead.

So under the current rules, an insurer that takes in $100 million dollars in premiums must spend $80 million on paying for health care and those broker commissions are included in the remaining $20 million.

But if this bill becomes law, those commissions — let’s just put a number of $3 million on them for this example — would no longer be part of the equation. That would mean the insurer would only have to spend $77.6 million on health care but would now have $22.4 million to use for its own purposes.

The National Association of Insurance found that altering the rule to remove broker compensation will result in a loss of more than 60% of forthcoming rebates for consumers.

“In just a few short months insurers must pay back consumers for wasting their money on inefficient overhead and excessive profit. But this bill would just put that money back into the hands of insurance companies” said Lisa Swirsky, Policy Analyst with Consumers Union. “This is a giveaway to big insurance and a significant loss for consumers struggling to afford health insurance.”

“The single biggest complaint we hear about health insurance is ever-increasing premiums,” said Swirsky. “This bill erodes the biggest tool we have for reigning in insurance companies and fighting rising insurance costs.”

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  1. coffee100 says:

    Repeal the 17th Amendment.

    • Bladerunner says:

      You don’t want senators elected by popular vote?

      • MrMagoo is usually sarcastic says:

        No. They should be serving the interests of their state, and appointed by the state government.

        It’s a subtle, but important difference.

    • crispyduck13 says:

      Term limits.

    • Emperor Norton I says:

      The reason for the 17th Amendment was that most senators got appointed by state legislatures through bribery.
      Now they spend the money on TV ads.
      Better it spent on TV than the legislators!

    • kc2idf says:

      I’ve heard this argument a lot lately. I really highly doubt it will fix anything. If anything, it makes our Senators less under our control, not more.

      The founding fathers were brilliant, make no mistake, but they were not always right.

  2. humphrmi says:

    Good coverage. Low rates. Policy availability.

    Pick two.

    • dolemite says:

      I choose: national universal coverage.

      • Helpful moose is helpful says:

        Good choice. The problem with the current system is that there are some many different parties in the value chain, all of whom need to make their own profit and pay for their individual overheads. Let’s see – benefits administrators, insurances companies, insurance brokens, primary care providers, hospitals, drug manufacturers, medical equipment manufacturers, etc etc.

        Of these, only a few really provide any real service: doctors, hospitals, drug and equipment manufacturers. The rest are all just overhead, taken money out of the system that could go on to patient care. There is no need for benefit admins, insurance companies or brokers to be involved at all. Going to a single payer system would eliminate all that overhead, leading to more cost efficiency and better oversight.

        But the businesses that would be impacted won’t let it happen – they’ll lobby like crazy to get their congress people to stop any sort of decent reform. So we’ll end up with either the crappy old system that republicans seem to like (employer sponsored healthcare eating up over 15% of GDP) or the new system that democrats like (mandated coverage that’ll eat up over 15% of GDP). I don’t know how we’ll ever get to a more sane system and reduce waste so that we can bring down healthcare to 10% or so of GDP like most other advanced economies.

      • humphrmi says:

        But you’ll still only get two out of three.

      • FiorellaMajumdar says:

        I don’t see senior complaining about Medicare, and Medicare is efficient and has better outcomes than your typical commercial plan.

      • Dallas_shopper says:

        This.

    • Kishi says:

      Half the time, it seems like I can only choose one of the three.

  3. Darrone says:

    Is there any legitimate justification, or is this just bought-and-paid for lobbying legislation.

    • Helpful moose is helpful says:

      Well, insurers are private companies, shouldn’t they decide how much of the premiums to use for what purpose? In a competitive market (like, say, the car insurance market), the market would decide over time the winners and losers. Those that spend too little paying out claims would get a bad reputation.

      But healthcare isn’t like car insurance in two big ways. First it is literally a life-and-death situation in many cases. If their insurer doesn’t support the treatment they need, they could die. They don’t get to change to a better insurer. Second, and more importantly, there is not a free market in heath insurance companies. You cannot go and compare different companies and pick the one with best reputation, because the market is controlled by employers who have a very different self-interest. No-one asks prospective employers about their health insurer. You have to like it or lump it.

      I would prefer to have a single payer (i.e. single insurer) system, it removes all the unnecessary middlemen/women. But if that cannot be done, the next best reform would be to take employers out of the system. Let everyone pick their own insurance (using pre-tax dollars) as educated consumers (with suitable provisions to ensure coverage to those with pre-existing and serious conditions, etc, which in practise will require a coverage mandate to avoid cherry-picking).

      • TeriLynn says:

        Except that my employer pays 90% of my premiums. If you take the employer out of the equation there is no way I can afford the sort of insurance I have now. I don’t think that my company is going to give me a 33% raise to cover the insurance, and for a lot of people that change would require their employers to more than double their salary to keep the same crap coverage.

  4. Squeezer99 says:

    Let us not forget that the Senate is ran by a Democrat majority.

    • DariusC says:

      Nobody forgot that it’s run by corrupt and greedy political parties.

    • castlecraver says:

      Let us not forget that this bill is sponsored by two republicans and two of the most conservative “democrats” in the senate, both of whom initially opposed and tried to hold up the affordable care act.

    • ARP says:

      The “troll” is strong with you.

      1) The bill has been introduced, not passed.

      2) If all the Rethuglicans (or, was your Democrat just a typo/mispronunciation that most conservatives just happen to repeatedly make?) vote for it and 3 or 4 D’s vote for it, has it been “passed” by the Democrats. If so, by that logic, the Republicans voted to pass HCR.

      3) You’re obviously a Republican. Republicans wanted the status quo. Meaning, this practice was just fine to Republicans. In fact there was no 80/20 rule to even have an exception. So, democrats voting for what the Republicans wanted all along makes them bad…for agreeing with you?

      • Actionable Mango says:

        I thought he meant there was no way this bill would pass because Democrats are in charge of the Senate.

        • Maltboy wanders aimlessly through the Uncanny Valley says:

          Shhh… Foaming at the mouth moonbat at work. Move along.

  5. Cat says:

    Senator Mary Landrieu is just responding to requests from the insurance industry.

    “Help us, Landrieu!”

  6. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Here’s some nonsense I could do without from my health care plan – it’s a Blue Cross Blue Shield plan. I received an envelope marked Confidential in yesterday’s mail, addressed to me, and inside was something called “MyHealth Note”. It lists my current medications, reminds me to take them as directed, and reminded me to get them filled as needed.

    I have 2 major problems with this.

    1. Even though I take mundane things for mundane middle aged lady issues, what if the mailman had dropped this in the wrong box, and a nosy neighbor decided to look at it?

    2. And further – why are they wasting money on these stupid mailings? This isn’t the only thing I get, plus I get robo calls with tips for good health. Just send me an email for crying out loud!!

    I’d rather they leave me alone and lower their rates a little!!

    Now my blood pressure feels higher, and I need my meds.

    • Herbz says:

      If your neighbor looked at/opened your mail, you can charge them with mail tampering….

    • cheri0627 says:

      They’ve also done studies that show that these costs reminding people to take care of their health, even if only 1 in 4 follow said advise, is much more cost effective.

      Seriously – reminding diabetics to visit podiatrists and get their feet checked regularly (and paying for podiatrist visits) is much cheaper than paying for the foot amputation and physical therapy and hospital stay and extra antibiotics and insulin during hospital stay and …….

      • MECmouse says:

        a good point about it being more cost effective but only for the insurance company which means increased profits for them not savings for the consumer.

        As for ‘reminders’ to those with major health issues (I’m a member for 30 years now at 46 and a diabetic), we know when we’re not following medical advice. The problem is that people have a ‘it won’t happen to me’ attitude of invincibility that results in trips to the ER, inpatient care, testing, and surgeries as well as multiple amputations (even after the first in the appendage has been removed from diabetics) and increased medical costs.

        If everyone here hasn’t seen The Rainmaker (1997) with Matt Damon you should watch it and fully understand exactly how the insurance companies have become the monsters they are, especially after they came up with the HMO.

        • wrjohnston91283 says:

          a good point about it being more cost effective but only for the insurance company which means increased profits for them not savings for the consumer.

          I’d rather have my foot and have the insurance company make some extra money than screw the insurance company out of a few thousand by having my foot amputated.

    • Yomiko says:

      Can you request to go paperless? That could keep your “explanation of benefits” statements away from the nosy neighbors, too :)

  7. MaytagRepairman says:

    My wife is an insurance broker who gets us by with her commissions. Believe me, we are not talking about executive fat-cat income here.

    • PunditGuy says:

      Why shouldn’t an employer be able to go straight to a carrier for service? Do they have phone service brokers and window washer brokers as well?

      Disintermediation FTW.

      • MaytagRepairman says:

        She is an employee of the carrier. The carrier has to have state licensed brokers even when the consumer calls up the company directly.

        • PunditGuy says:

          You’ve described the status quo, when I was questioning its justification. I agree that states force the use of a middle man. Why?

    • SecretAgentWoman says:

      Nobody is saying she won’t get paid. Only the insurance companies will have to cover it in their own 20% allowance.

      They want to keep that money for themselves, and pretend that fees to brokers are a “medical expense” instead of overhead. Bull.

      • MaytagRepairman says:

        What will happen is the carrier will eliminate the sales comission to their in house brokers. Turnover will follow. The consumer will end up being greeted by a sales staff that just got their license 4 weeks ago. The fat cats never go without less.

        • RvLeshrac says:

          Which will result in more mistakes. Which will result in more lawsuits.

          I don’t see the problem here. They can use competent brokers and pay them fairly, reducing executive pay and bonuses, or they can use incompetent brokers at low rates of pay, keeping higher executive pay and paying out substantially more in legal settlements – which has to come out of the 20%.

          • voogru says:

            Or option three.

            Get into another business and you get to find a new health insurance carrier that will be able to charge you even higher premiums because of less competition.

  8. DerangedKitsune says:

    Ah, nice to see lobbying $$ at work.

  9. TheMansfieldMauler says:

    In just a few short months insurers must pay back consumers for wasting their money on inefficient overhead and excessive profit. But this bill would just put that money back into the hands of insurance companies” said Lisa Swirsky, Policy Analyst with Consumers Union.

    Will Lisa Swirsky please tell us exactly what the amount of “excessive” profit is? I don’t want to be greedy, and she must be the keeper of the standard since she knows it’s excessive.

    Note: if you know of a company that is slated to make “excessive profit”, you should not be complaining. You should be investing.

    • dush says:

      Which I’m sure those Senators will do as soon as they get the bill through committee.

    • RvLeshrac says:

      If a company is making “excessive profits,” it means they’re doing it at a cost to society as a whole. That means failing to invest in workers, communities, education, infrastructure, you name it, for the benefit of a few.

      If you don’t care about that cost, I’m curious, where the hell do you live that you never need a single thing (clean water, clean food, modern medicine, the electrical grid, telecommunications, motor vehicles, paved roadways, a market economy) that our society has provided?

  10. rugman11 says:

    “In just a few short months insurers must pay back consumers for wasting their money on inefficient overhead and excessive profit”

    Inefficient overhead I can’t argue, but Health Care Plans currently rank 150th in net profit margin, right below Waste Management and two spots below Home Improvement Stores. Where is the outrage over the “excessive profit” of Lowe’s and Home Depot?

    http://biz.yahoo.com/p/sum_qpmd.html

    /though now that I look at it again, Accident & Health Insurance is 101st, so I’m not sure which category is which.

    • DariusC says:

      The difference is the industry. It’s a conflict of interest to have a choice between personal profit and customer health because human nature often errs to the side of self-benefit. Medicine should be non-profit to encourage those seeking to help people to become part of the field rather than people only interested in the money. Doesn’t mean you don’t get paid, it just means you don’t get paid an unreasonable salary. Likely you will be paid according to a set schedule like the General Schedule for Government.

      • rugman11 says:

        I think that’s a terrible argument, akin to that Alabama state senator’s argument that we shouldn’t pay teachers too much because only want those who are “called” to teaching. Health care is a big deal, I want the best and the brightest treating my cancer and other diseases, not the ones who feel “called” and have no other skills that they can use to make more money.

        • Mit Long says:

          I see it as you do Rugman.

        • joako says:

          Exactly. So the majority of the money you pay for health care (to the insurance company) should go to the DOCTORS and not the company that takes your money and gives it to the doctors and not to their sales reps or brokers.

    • darklighter says:

      The difference is that if I can’t afford a 2′ x 4′ at Home Depot, I’m not going to die.

      • rugman11 says:

        Do you need food? Because the food industry’s profit margin is roughly 15% greater than the health care plan industry’s.

        • GoldVRod says:

          I can grow food in my back yard garden… And I do and it lasts me months during the winter.

          I take 4 Balsalazide a day to keep me from bleeding to death internally. When I can grow THAT in my backyard then your argument will have merit.

          Until then. Nahh.

    • PunditGuy says:

      That’s the beauty of the regulation. The multi-million-dollar salaries and huge bonuses are overhead, as are the spectacular inefficiencies that eat up premium dollars. They can’t hide behind their inefficient operations and whine about their low profit margins.

    • Megalomania says:

      profits are after expenses, e.g. overhead. There are already laws that prevent health insurance companies from having high profits, but without the new (current) law, they could make their profit as low as they want by paying more to executives instead of shareholders. Same greed, different beneficiaries.

  11. dolemite says:

    I would, but my health insurance premium for a family of 4 are $950 a month with a $3,000 yearly deductible where I work. Who has money for investing?

  12. jrwn says:

    This would be why Ben isn’t running again.

  13. Tardis78 says:

    Though if you look, historically, voting rates were higher prior to the 17th Amendment. In a way it would draw more into the process. The same goes with primaries and so forth.

    • ARP says:

      You could put election day on a Saturday or Sunday like many other countries. But that would mean the more poor/middle class people could vote and we don’t want that.

      • Darury says:

        Having worked a lot of low-end jobs prior to moving into IT, I never had ONE that didn’t allow time for voting either before your shift (come in late) or after your shift (leave early). Since most polling places are open from 7am to 7pm, I find it hard to believe that there is a huge section of voters who simply can not possibly find time to vote if they wanted to.

        • TeriLynn says:

          There are those with physically demanding jobs that are just too tired to go after work. There are those with children who can’t afford to spend more to go vote, if their daycare will even allow the extra time. I’m not saying that all of these issues would be solved by weekend-voting, though. In the State of Washington, all voting is by mail and it is very convenient and drops these hurdles. The only issue I see there is that you have to pay for postage, but that is less than bus fare to the precinct might be.

  14. Tegan says:

    Johnny Isakson is such a piece of crap. I got form letter responses from all three of my congresscritters after writing them about SOPA/PIPA last month, and his was the only one that basically said, “That’s nice, but fuck you. I do what I want and I’m supporting this.” So not surprised that his name is on this. Living in Georgia is depressing sometimes.

    • dolemite says:

      Hey, I get those too, from my Congressmen. Of course I live in a red state and tend to be against 99% of things they support. In my last message, I told him to don’t bother with the form letter.

    • Mr. Bill says:

      I live in Michigan and got the same bull from my supposedly liberal Congress creeps.

  15. HogwartsProfessor says:

    *facepalm*

    Stop it, Congress. Just stop it. You wrecked this country and now you’re trying to kill us. Stop it. Don’t make me come up there.

  16. Firevine says:

    Oh noes! Someone might make a profit! We have to stop this!

    Nevermind that the average net profit margin for all the insurance companies is somewhere around 4.5%, lets nail those bastards to the wall because I have an entitlement mentality that makes me think everyone owes me everything.

    Oh, yeah, and lets ignore those trial lawyers and mandatory coverage that jacks up the price.

    • Fubish says: I don't know anything about it, but it seems to me... says:

      Yes, but the median for ALL American companies is a little over 2% – the insurance companies therefore net DOUBLE the median. The insurance companies are doing QUITE well, thank you.

      • deejmer says:

        Stop it with your logic. Republicans hate that logic stuff….they fear their supporters might actually realize they are constantly being thrown to the dogs by their actions.

    • RvLeshrac says:

      Lawsuits have fuck-all to do with the rates. Texas “Reformed” their legal system years ago, but that hasn’t done anything to reduce premiums or malpractice rates.

  17. mannyvel says:

    It doesn’t matter much, since the administration will grant a waiver to whomever asks. All the union plans probably have waivers by now.

  18. Maltboy wanders aimlessly through the Uncanny Valley says:

    I wonder if it would be easier for insurers to meet the 80% rule if Democrats had not killed two minor adjustments to Obamacare just to appease their owners:

    1. Limit tort liability
    2. Allow competition across state lines.

  19. oldwiz65 says:

    Naturally the Republicans are doing anything they can to help the fat cats who contribute so generously to their “election campaigns”. It would be so nice if they would just start being honest and saying “bribes”

    • hansolo247 says:

      And you think Democrats don’t?

      If you read Obama’s sponsor list, it looks the same as all the other candidates, except one.

  20. ericfate says:

    Would have been nice to see the article actually demonstrate what a broker actually does or make an attempt to demonstrate what they actually earn. I realize just pulling numbers out the air is faster and easier, but without providing any data to substantiate the claim by the NAI this is all kind of worthless. Frankly, I’m amazed by those numbers. We sure as hell don’t pay them that much on the not-for-profit side so I don’t really understand how someone could reimburse them at that high of a rate and not immediately run themselves out of business by pricing the customer base out of a product.

  21. u1itn0w2day says:

    Imagine a for profit health care system with the ability to pay it’s executives more money.

    Rather than worry about what someone makes if actual competition existed in the medical insurance industry including the ability to buy & sell across state lines I doubt these corporations would be so liberal with their left overs.

  22. Shorebreak says:

    Filthy, greedy, bribed, bought and paid-for politicians. “The best government money can buy.”

  23. prizgrizbiz says:

    If the ‘Affordable Care Act’ has been passed, and I couldn’t afford care if it cost half what it does, what good does it do me?

  24. oldwiz65 says:

    The insurance companies desperately need the money to fund the executive bonuses. The way to get ahead in the insurance companies is to find some way somewhere in the rules to deny as many claims as possible, never mind how much misery and death you may cause in the meantime. So the top insurance executives are the ones who have caused the most misery to the insured.

    • JollyJumjuck says:

      Insurance companies in North America have tried to weasel out of claims for decades. Whether it is health claims, auto claims, home claims, you name it. When the policyholder does something unethical, it`s called “insurance fraud.” When the company does something unethical, it’s called “good business sense.”

  25. FiorellaMajumdar says:

    Insurance brokers are simply a vestige of a long-gone era when everything was done on paper and your idiot nephew needed a job where he couldn’t do too much damage. This is simply a way to shift money to those with connections while shafting the consumer because when scandals around insurance wash over the community, it’s usually a shady broker who had his hand out to kick things off. The legislators who proposed this should be run out of office and prosecuted for misconduct.

  26. DonnieZ says:

    Since “Affordable Health Care” has passed we’ve been through two health insurance premium raises.

    I’m not exactly sure who health care is getting more affordable for…