Anthony Halby: Response to article by Darrell Berkheimer on insurers overcharging
While reading Mr. Berkheimer’s Oct. 11 article, I can agree with most of it. However, there are certain things that need to be explained.
Prior to passage of the Affordable Care Act, the insurance companies could estimate their risks with two options: 1. a pre-existing condition clause, and 2. a limit on what their risk would be. In most states, this ranged from $1 million to $3 million. In California the maximum benefit was $6 million.
The ACA imposed several restrictions on the health insurance companies. 1. No pre-existing condition clause. 2. No lifetime maximum. 3. They must pay 80% of premium in claims or rebate the difference.
So, prior to the ACA, a company could practice risk management by coming close to estimating its claims. Now, the carriers cannot do that. So, they make their best guess and hope they are close. When they guess wrong, the difference is returned to the consumer.
This situation resulted in a lot of good companies leaving the health insurance market. One carrier spent $1 million a day for the first 90 days, and made the decision to leave the market. Thus fewer carriers are willing to take the risk.
Finally, insurance companies are required to have reserves to pay for these claims. Not being able to actually estimate claims, their reserves must be larger than normal.
Anthony W. Halby, president
The Halby Group, Inc.
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