Green Room

CBO confirms ObamaCare is a takeover of the health insurance industry

posted at 9:06 pm on December 14, 2009 by

While everyone has focused on the Senate Dems caving to Sen. Lieberman’s demand to drop the “public option” from ObamaCare, this tidbit has slipped by largely without notice:

The CBO on Sunday issued a strongly worded memo on the proposal establishing all health insurance companies’ “medical-loss” ratio at a maximum of 10 percent — meaning 90 percent of premiums would have to go to medical claims. Companies would have to issue rebates to their customers if they fail to meet this standard. Alternatives would set the level at 80 percent to 85 percent, as included in the House-passed healthcare bill.

Considering the medical-loss ratio in tandem with the other strict new insurance regulations contained in the bill, the CBO predicted that such a policy would “reduce the types, range of prices, and number of private-sector sellers of health insurance,” the memo says.

“In CBO’s view, this further expansion of the federal government’s role in the health insurance market would make such insurance an essentially governmental program, so that all payments related to health insurance policies should be recorded as cash flows in the federal budget,” the memo states. (Emphasis added.)

The official copy is available through the CBO. OpenLeft’s Chris Bowers moans:

The Senate will not pass a public option. It will not pass a Medicare buy-in. It will not mandate a 90% medical loss ratio. Ugh. This deal keeps getting worse all the time.

If only Darth Lieberman would appear to say, “Pray I don’t alter it any further.”

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Yep, that really is the most insidious and largely unnoticed measure in the bill. I was most disturbed by it for this reason.

The provision in the latest manifestation of DemCare, which would require companies to pay out 90 percent of their revenue to beneficiaries, is going to stick it to already struggling Americans. Let’s say, as a hypothetical, that an insurance company is taking in 80 million dollars. If we assume this company is paying out 70 million to beneficiaries, that would leave ten million left for operating costs and profit. Under the new deal being worked out in the senate, this company would have to raise their total revenue to 100 million in order to maintain the ten million dollars for profit and operating costs. This 90 percent provision all but guarantees that the cost of insurance will rise, rather than fall. Either insurance companies will see less profit or they’ll be forced to increase their revenue by raising premiums. Which do you think is more likely to occur?

The CBO’s determination is disturbing. Thanks for putting it on the radar, Karl.

Stickeehands on December 14, 2009 at 9:16 PM

Good job.

Robert17 on December 14, 2009 at 10:14 PM

this should be front page.

deidre on December 14, 2009 at 10:28 PM

Great work Karl!

FireBlogger on December 14, 2009 at 11:24 PM

Are there enough swords to around?

Americannodash on December 15, 2009 at 2:07 AM

Even if the Senate manages to pass some watered down version without the most odious sections of their bill, it will have to go to committee to be reconciled with the House bill. All kinds of tricks will be used to get everything they want back into the legislation. This thing needs to be killed deader than a door nail.

Kissmygrits on December 15, 2009 at 8:58 AM

Folks, we’re coming down to pitchforks in the street time. The Democrats are going for broke on this bill, establishing federal control of insurance companies and an individual mandate for now and going for more later. Higher taxes, reduced medical care for seniors, more government control over our lives… Unbelievable.

MTF on December 15, 2009 at 10:22 AM