Portland, ME - Come to find out, healthcare used to be predominately non-profit, with a goal toward controlling costs. This all changed when President Nixon signed the Healthcare Management Organization Act of 1973, allowing for-profit corporations to contract with independent practice associations (IPAs), who in turn contracted with individual physicians and health practitioners.
By the 1990s, roughly 68% of premiums paid went toward actual medical care. The rest went to line the pockets of executives.
Obamacare recognized this by creating the 80/20 rule, where at least 80% of premiums paid were to go toward actual medical care and costs. As Healthcare.gov explains:
The 80/20 Rule generally requires insurance companies to spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs.
The 80/20 rule is sometimes known as Medical Loss Ratio, or MLR. If an insurance company uses 80 cents out of every premium dollar to pay for your medical claims and activities that improve the quality of care, the company has a Medical Loss Ratio of 80%.
Insurance companies selling to large groups (usually more than 50 employees) must spend at least 85% of premiums on care and quality improvement.
If your insurance company doesn’t meet these requirements, you’ll get a rebate on part of the premium that you paid.
But with the GOP in power, and with the growing probability that Obamacare will be repealed and replaced, it looks like healthcare costs will continue to rise.
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