Mandatory Bad Customer Service
By Arnold Kling
The recently passed Affordable Care Act requires heath insurance issuers to use at least some minimum fraction of revenue from the premiums it receives on medical services. While the idea might sound straightforward, this fraction, known as the “medical-loss ratio,” is open to all sorts of creative arithmetic, and you can bet that interest groups from every corner are trying to get the math to add up in their favor.
He does not get what is really wrong with this provision. A big cost component for health insurance companies is customer service. In competitive markets, insurance companies answer the phone. But some states discourage health insurers with regulation, so that we end up with near-monopolies in the individual and small-group market. See Maryland, where just about everyone other than Blue Cross has been driven out of the market by regulation–the situation is more competitive in Virginia. But above all, see Medicare, which has a monopoly on senior.
Try getting through by phone to a monopoly insurer, especially Medicare. If you need to talk to a human being about your situation, heaven help you. And if you have ever been in a situation where you could not get through to a health insurance person, you probably were ready to go postal (in our family, we actually call it “going health insurance.”) Physicians, too, feel the bad-customer-service pain.
But under the new health care law, health insurance companies are supposed to act as pure conduits between premium-payers and health-care providers. So what the new “health care reform” law does is provide incentives for health insurance companies to cut back on customer service.