Election 2012

Obama Administration Now Basically Just Requiring Health Insurers to Send Out Campaign Mailers

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If you're getting a rebate check from your health insurer, the Obama administration wants to make sure you know where it really came from. Lest no one be confused about the political purpose of the mandatory rebates

Health-insurance companies must tell customers who get a premium rebate this summer that the check is the result of the Obama administration's health-care law, according to federal guidelines released Friday.

…Rules finalized by the Department of Health and Human Services on Friday instruct insurers to notify recipients of rebates in the first paragraph of the mailing by writing: "This letter is to inform you that you will receive a rebate of a portion of your health insurance premiums. This rebate is required by the Affordable Care Act—the health reform law."

So just a few months before the presidential vote, health insurers will be required to send out billions of dollars worth of checks that credit the Obama administration. Hint, hint, nudge, nudge, remember us come November! I guess the White House didn't think they could just force health insurers to run ads for Obama's reelection campaign? 

According to The Wall Street Journal's report, one variant proposal had called for insurers to send out detailed information breaking down exactly how premium dollars were spent, which would have come with compliance costs, but at least would have provided consumers with actual information. But instead the Obama administration seems to have settled on requiring insurers to send out campaign flyers attached to checks.

Here's what the notices won't tell you: Despite the rebates, the existence of the health care overhaul isn't necessarily ensuring that health insurance customers get a better deal.

The rebates will be issued as a result of the law's medical loss ratio provision, which requires insurers to spend either 80 or 85 percent of the premium revenue they collect on clinical services. Insurers must pay for administrative expenses, overhead, marketing, and profits out of the remaining 15 or 20 percent.  Ultimately what that means is insurer profits are capped as a percentage of premium revenue. So if insurers want to increase their profits, they will have to increase the premiums they charge.

Over time, this will put tremendous pressure on insurers to increase premiums rather than to restrain their growth. As a result, it's entirely possible that in the absence of the health care overhaul insurance premiums would have been lower than they'll end up being under the law even if you factor in the rebates. But at least the Obama administration will get credit every time someone gets a check. 

Update: I should note that amongst those enrolled in plans that will receive rebates, not everyone will get rebates directly. As The Journal reported in April:

People with individual insurance may get rebates in the form of checks or discounts against future premiums. Rebates for group plans are expected to go to the employers, and a share is supposed to be passed through to employees.