Health Insurance has always been presented as a method of sharing risk across large groups so that when catastrophe strikes you are covered. The theory is that premiums create a large pool of money that is used to cover you in the case of need. Conversely your premium is used to help someone else. This of course breaks down as soon as somebody can find a way to get folks who might actually need to use their policy denied benefits. The insurance industry uses rescission, purging, and the latest game, the Medical Loss Ratio.
Medical Loss Ratio is a term that has nothing to do with providing health care, but everything to do with profitability of for profit insurance companies.
Here is a quote from Wendell Potter, who until recently was the Chief PR guy at Cigna, during an interview with Bill Moyer.
WENDELL POTTER: Well, there’s a measure of profitability that investors look to, and it’s called a medical loss ratio. And it’s unique to the health insurance industry. And by medical loss ratio, I mean that it’s a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims. And that has been shrinking, over the years, since the industry’s been dominated by, or become dominated by for-profit insurance companies. Back in the early ’90s, or back during the time that the Clinton plan was being debated, 95 cents out of every dollar was sent, you know, on average was used by the insurance companies to pay claims. Last year, it was down to just slightly above 80 percent.
After watching this, you may have a different view on health insurance.