Baucus Bill Part III: Will it really be cheaper?

The CBO believes that employer provided plans will be “more expensive that the low-cost plans available in the exchanges, because healthcare services in those exchange plans would be more tightly managed.” [September CBO letter, page 4]

Administrative costs for all health plans, both for-profit and nonprofit, have averaged about 11% of premiums. The BCBS family of companies average about 10%. In fact, Highmark BCBS, a nonprofit insurer, in PA specifically states that their goal is for 90% of premiums to go toward paying medical expenses (aka medical-loss ratio) for enrollees. To more tightly manage the plan requires higher administrative costs, not less. And what does more “tightly managed” mean to the doctor and patient? You can bet there will be stricter standards for ordering tests/procedures, more “red-tape” and more non-certifications of coverage. There is simply no other way to make up for the added administrative costs, pay claims and still be competitive with the private sector marketplace, let alone be more affordable for individuals or small businesses.