Support Health Care Reform Now
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Radical Steps
Both bills also contain provisions that would require health insurance companies to spend at least 85% of their total premium income on claims. This means, in effect, that the gross profit margins of these companies will be limited to about 15% of gross revenues. Net profits would be limited to a fraction of this percentage, because from this gross profit companies will have to pay their overhead and administrative fees and any return to shareholders. If companies exceed 15% gross profit, the extra profit must be returned directly to their customers.
This is a truly radical provision. No other American industry has its profits regulated by the Federal government. There is some doubt about whether such a provision is constitutional. Yet there has been no real debate and no real controversy about this provision in the news media –
the opponents of health care reform have not raised this issue as a reason to oppose it. Perhaps they do not want to draw the public’s attention to the fat profits some of the private health insurers are making.
The companies will still have a powerful incentive to insure healthier people, because if the 15% profit limitation is judged to be constitutional, they would much rather pay rebates to their customers than fall short of their 15% margin and have to take the difference out of dividends provided to their shareholders, or bonuses paid to their executives. Private companies will still have an incentive to avoid insuring those with chronic ailments. But the new law will not permit them to “cherry-pick” the youngest and healthiest customers as they do now – unless they are willing to violate the law.
The public option could act like a pressure relieve valve, reducing the pressure on private insurers to comply with the new law.
I expect they will choose instead to drag their feet on all applications except those of the young and healthy, hoping those made to wait will choose to go elsewhere. 
It is for this reason that we may all be better off for the next several years without a public option. The public option might act like a pressure relief valve, reducing the pressure on private insurers to comply with the new law.
Without a public option, the private companies will come under intense pressure to approve applications rapidly. Foot-dragging could become a law enforcement issue, and most of those companies who might otherwise engage in these stalling tactics will decide it’s not worth it if fines and jail time are added to the calculus. If a public option exists as an alternative to private insurers, it would presumably accept all these applications and enroll all these people while the private insurers dither. As a result of this process the public option could become a dumping ground for sicker people, its costs could escalate, and its political support could collapse.
With no public option, this nightmare scenario cannot play out. All the pressure will be on private insurers to act expeditiously on new applications and obey the law. Those that fail to comply with the universal mandate will become extremely unpopular. Many will drag their feet anyway, but they will be subject to intense pressure and intense scrutiny from the media.
Mandatory Tests
Private insurers will also have a powerful incentive to improve the health of their enrollees. All preventative tests that can actually save them money will soon become virtually mandatory, tests like annual pap smears for women over 20, mammograms for women over 50, and colonoscopies for everyone past 50. With more people insured and more people taking these screening tests, death rates from treatable disease will surely decline.
The new law could save as many as 30,000 lives each year.
This is the most powerful benefit we will be able to measure from the current round of health care reform. The new law will actually save lives, perhaps as many as 30,000 or even 40,000 per year.
This consequence alone is reason enough to support the new law.
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