I’ve often said that the Affordable Care Act is the end of the beginning of health reform. It addresses many problems associated with health insurance, but more must be done to control costs and access real universal coverage. And flaws in the law need to be fixed.
However, the reform law will end some of the most abusive insurance industry practices, such as blackballing folks with pre-existing conditions and cancelling policyholders’ coverage when they get sick.
And health insurance companies now have to spend at least 80 percent of our premiums on actual health care. If they devote more than 20 percent to administrative overhead and profits, they are supposed to send rebate checks to their policyholders. Since that 80/20 rule went into effect last year, consumers have saved almost $1.5 billion, mostly in the form of those rebates, according to a new study by the Commonwealth Fund.
The rule has also resulted in lower premiums for many and elimination of hundreds of millions of dollars in administrative waste. That’s the good news. The no-so-good news is that because the reform law does not give the federal government the authority to regulate rates, many health plans used their administrative savings to boost profits instead of reducing premiums.
That situation reflects not only a flaw in the federal reform law, but also the ineffectiveness of health insurance rate regulation at the state level. In only a few states do insurance commissioners have the authority to reject unwarranted rate increases, and even in the states that do, many health plans are exempt from state regulatory oversight.