PelosiCare's price controls will bankrupt health insurers in one year

Buried deep inside the 2,200 pages of H.R. 3962 ("The Affordable Health Care for America Act", A.K.A. "PelosiCare") is a section that mandates the profit margins of health insurers.

‘SEC. 2714. ENSURING VALUE AND LOWER PREMIUMS.

‘(a) In General- Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in which the coverage has a medical loss ratio below a level specified by the Secretary (but not less than 85 percent), the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of the amount by which the issuer’s medical loss ratio is less than the level so specified.

No company has ever survived with a loss ratio approaching 85%.

What exactly is a 'loss ratio'?

Put simply, it is the ratio of the claims paid by an insurance company to the premiums collected. Usually the ratio is calculated on a yearly basis. And, in the context of legislation, loss ratios are price controls.

A 2008 document by the Council for Affordable Health Insurance describes state experiences with mandated loss ratios.

While many states have implemented loss-ratio requirements, few have ever tried loss ratios at or above 70 percent... states hope[d] that by squeezing down the [insurers'] administrative costs... insurance [would] become more affordable and more accessible. However, the experience of other states... provides little hope for success.

An 85% loss ratio, as mandated by PelosiCare, would bankrupt insurers within a year. No mandated loss ratio has ever come close to 85%.

Why would a loss ratio that permits only a 15% administrative margin for insurers cause companies to fail? Consider that the administrative expenses include collecting premiums; processing and paying claims; monitoring patient care; staffing customer service functions; paying costs to state and federal regulators; paying sales agents; and general overhead (rent, power, heat, light); etc.

I repeat: No company has ever survived with a loss ratio approaching 85%.

A loss ratio of 85% will bankrupt health insurers in less than a year

If you work for a health insurer, if your business is a supplier to a health insurer, or if you are customer or simply a shareholder, say goodbye to the private health insurance industry.

So, no, you won't get to keep your private insurance plan. That's guaranteed under H.R. 3962.


Update: An employee of a health insurer clarifies, "Congress voted to fire me last night." (hat tip: Larwyn).

Update II: Liberty died last night... to thunderous applause.