[quote=ucodegen]
The degree of discount on rates is largely a fallacy. An easy way to check would be to figure out how much is being paid in for a GP’s office using self-pay rates and then calculate out what the effective earnings would be (subtracting office overhead, support personnel wages and insurance, malpractice insurance). The numbers end up not working out for a large discount. I even ran this for my GP.
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There is a field within an insurance company’s 10K/Q that you may want to look at. I don’t remember the exact name is, but it equates to the ratio of claims paid out vs premiums paid in. Usually this number is less than one. During the time between the premium being paid in and the claim being paid out, the insurance co has use of that money for investing.[/quote]
It’s not a fallacy, it’s real. I just checked my summary of charges for 2008. My total charges were $3,884. My insurance (Aetna) paid $1,972.91, and I paid $170. Providers (for this year, coincidentally, it was 100% Scripps Clinic) took a discount of $1,741.90 or 44.8%. For 2009, the numbers are similar (total of $2827, insurance paid $1606, i paid $90, net discount of $1131 or 40%). I have no idea how the providers overhead and expenses are related to this issue. Those are mostly incurred regardless of cash payers or third party payers. (There would be some savings obviously if they didnt have to process all the insurance/medicare stuff.)
The term you’re looking for is loss ratio. The % of premium dollars that are paid directly for health care. It is always less than 1. If it was anywhere near 1, we wouldn’t need reform. That’s a huge part of the problem. In the late 80’s to early 90’s, when I did health care financing consulting for small medical groups and non-profit hospitals, (when capitations for primary care physicians was becoming common place) loss rations were in the very high 80’s to mid 90’s. (I remember one year when, i think it was Blue Cross, bragged about getting their loss ration below 90%) They’re now in the high 70’s to low 80’s and getting worse for consumers, better for insurance companies. All that extra profit is going directly to the bottom line of insurance companies. The system is irreparably broken.
Medical insurance is claims incurred insurance. Since most policies call for monthly or bi-monthly premiums, use of the premiums prior to payment of claims is not material as it is in life, disability or even professional liability insurance, where payment of claims are deferred.
