The Bomb Buried In Obamacare Explodes Today-Hallelujah!

[Bob Wallace]

66. I don't understand that thinking...

You're saying that the XYZ insurance company is going to prioritize claim denial over providing services?

All of that money is part of the 80%, not the 20% out of which its profits will derive. They can't cut services and increase the size of their 20%.

If they deny a lot of claims, then they will piss off a lot of customers who then move to another insurance company. Those disgruntled ex-customers will take a lot of other customers with them through word of mouth and bad-feedback posts on public forums.

They don't have the option to "spend 20 to make 80". They have to spend 80 on customer service in order to gain 20 for admin overhead and profit. Their admin overhead is going to be somewhat fixed. You've got buildings, advertising, clerical, financial staff - all that sort of stuff. They're going to be able to pocket about half of the 20%. The last thing they would want is fewer customers paying in so that the pool of 20% shrinks. They want to grow the number of customers so that fixed costs eat a smaller amount of the 20% leaving company owners more profits.

The danger, as I see it, is that some companies provide more services than needed, allow unreasonable claims, in order to raise the amount they pay out and thus justify a higher premium. A higher premium would mean a larger 20%/"half of 20%".

The stopgap here is competition. On a very public buying pool like the Exchange sets up if XYZ, Inc. runs its premiums up in order to increase the size of their 10% profit then they risk losing customers to other companies with lower priced premiums.

Looks to me that some decent contingency engineering went into the thinking on this piece of legislation.