Reuters Money
Patient Protection reform could mean higher healthcare costs
Of the endlessly debated provisions in the Patient Protection and Affordable Care Act (PPACA), the requirements for Medical Loss Ratios (MLRs) stand out for insurance companies because the requirements are designed to dictate how those companies pay their bills.
Until now, it’s been mostly unclear how those requirements will affect consumers. But a new study from the U.S. Government Accountability Office released last week sheds some light. And experts are weighing in.
First, some background: For every dollar taken in by insurance companies for health plans, those companies will now be required this year under the PPACA to spend either 80 or 85 cents – depending on the size of the plan; smaller group plans are held to the lower number – on costs related to healthcare.
In the past, insurance companies have traditionally spent less than that on healthcare costs and as much as 30 or 40 percent on administrative costs. The ratio of healthcare costs to administrative costs is called – you guessed it – the Medical Loss Ratio.
If companies do not meet the new MLR requirements under the PPACA, they are required to send their customers a refund to make up for the difference. This year is the first year that insurers will be held to the MLR requirements; the first set of insurer data is due in June 2012.
The goal of the MLR requirements is to make health insurance companies more efficient, says Dr. Timothy S. Jost, a law professor at Washington and Lee University who is a co-author of a textbook on healthcare law and a consumer representatives to the National Association of Insurance Commissioners, which helped to develop the MLR requirements.
The MLR requirements will “eliminate administrative costs, control profits and hopefully force these companies to provide better care to people,” he says.
Retirement solvency “a growing challenge” says GAO
The risk that retirees will outlive their assets is a growing challenge, the federal Government Accountability Office said in a not-so-newsy report released on Friday. To meet that challenge, experts advise retirees to delay the start of their Social Security benefits, avoid spending down their nest eggs too fast and consider using annuities in some situations, says the study.
The report could be used to nudge forward policy initiatives already under consideration that would encourage companies to offer annuity choices to their retiring workers. The report was requested by Senator Herb Kohl, chairman of the Senate Special Committee on Aging. He has cosponsored a bill, called the Lifetime Income Disclosure Act, that would require 401(k) statements to include an annuity equivalent number — the amount of monthly income that the savings accumulated would support.
The Treasury Department has asked for public comment on the idea that employers, given some safe harbor against lawsuits, could encourage workers with 401(k) accounts to annuitize their savings. Mark Iwry, the Treasury Department official who has been looking at these retirement issues, commented in a letter to the GAO. “We will take the information and analysis in the report into account as we consider guidance to issue.”
To conduct the study, the GAO created sample retiree profiles at varying income levels, with and without defined benefit pension plans. It then asked a host of experts within the financial services industry, academia and a “retiree interest group” (I’m going to guess that it was AARP) how they would advise retirees with those profiles to protect their income for the long haul.
The experts generally recommended familiar strategies: (1) leave your money in your defined benefit plan and take an annuity instead of a lump sum; (2) make systematic (and not unreasonably high) regular withdrawals from your savings; (3) delay the start of your Social Security benefits; and (4) consider buying an income annuity to cover some basic expenses for the rest of life.
The GAO also surveyed retirees to see if they were following that advice and found, in general, that they were not. Roughly half of retirees take their Social Security benefits before their 63rd birthday, according to data cited in the report.
The experts surveyed by the GAO suggested that middle-net worth households that did not already have a defined benefit plan could gain the biggest advantage from buying income annuities, in which a sum of money buys a guaranteed lifetime monthly stream of income. “They should consider using a portion, such as half of their $191,000 in financial assets to purchase an inflation-adjusted annuity,” the report says, noting that it would provide an additional $355 per month until the death of the last surviving spouse, and grow in subsequent years with the Consumer Price Index.
I know it’s tough for policy makers to understand this but no amount of changes in policy will ever get people to prepare for retirement. The problem is part of our social mindset to avoid anything that has the slightest bit of discomfort today with a payoff that is 40 years in the future such as preparing for retirement.
There are great investments out there in Healthcare IT, you just have to find them,, here is one….
After following MMRGlobal for the last 3 years our research has concluded that OTC: MMRF is one of the most undervalued health care IT plays we’ve seen in recent years. The definitive agreement announced by the company on September 19th adds the credibility we were looking for to the earlier September 7th announcement of the non-binding term sheet with the same company. From sources in the industry, if MMRGlobal acquires over $150 million in revenue this stock currently trading at $.03 could realistically trade at a valuation of $3.50- $4.00 stock with a market cap in the $800mm to 1.2b range. We base this on comparable valuations in the health care IT sector such as Accretive Health and Merge Healthcare Inc. It is important to note that MMR is the only pure play personal health record company with connectivity to any health care professional, EMR, patented technologies, with an emerging global footprint and very credible strategic partners including AIG/Chartis, Kodak, Unis and others. Considering the most recent industry valuations, health care IT firms are being valued at 4 to 6 times revenue. With the MMR announcement of a definitive agreement with the firm who invested almost half a million dollars in MMRPro, the combined companies will offer health IT proprietary software and revenue cycle management solutions to its own surgery center clients in addition to the PHR solution it offers to the surgery center patients and the mass market. Additionally MMRF has a biotech portfolio that could have a value of at least the 140 million dollars the company invested in it