2013
When I was a director of benefits for a large company with self-insured health benefits I set an annual budget for those benefits. Generally, we were pretty accurate, but on occasion we were over or under budget. I recall one time when setting the budget I was called to the CFOs office. He said that last year we were under budget and therefore he wanted to lower the next years projection. I cautioned against that pointing out that the budget was set using health cost trend information from various sources, considering our plan designs and with the concurrence of the actuary working with us. My view was that it would be better to be under budget at year-end than over budget. These estimates also determined the premiums we would charge employees. I did not want to overcharge employees, but more important, I didn’t want to under charge and then have to make up the difference the next year thereby causing so-called premium shock for our workers. In other words, we were being prudent to protect the company and employees as best we could with the information we had.
The CFO persisted I guess for the sake of company earnings. You’re the boss, tell me the percentage you want me to increase the budget and I will do it, but remember, regardless of what we do, the claims will determine the actual spending. I recalled that two years ago we had one claim for $1.2 million. Grudgingly he told me to leave the budget as it was.
There is nothing essentially different today between this story and what is happening in the new health insurance exchanges. Well, that’s not entirely true, today there is a strong desire to keep premiums (quite possibly different from costs) as low as possible in the initial year and … there is politics. Let’s hope neither get in the way of prudent premium setting.
Citing what they called flawed data and unreasonable assumptions, Maryland insurance regulators on Friday sharply reduced prices for health plans that will be sold to individuals and families through the state’s insurance marketplace starting Oct. 1.
via Maryland Regulators Slash Rates For Obamacare Insurance Policies – Kaiser Health News.
QUINNSCOMMENTARY 
Maryland is a liberal tax wonderland. It will be interesting to see what happens when they chase all insurers but one out of the market.
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My unprofessional knowledge of Obamacare is that the health plans have an out: For the first 3 years, we who buy insurance will have an added risk fee (reinsurance) hidden in our bills, to reimburse any health insurer who experiences losses greater than 3% on the Obamacare exchanges. This is totally unreported by the MSM.
That makes it pretty easy for Maryland to force down rates, and easy for the insurers to grin and bear it. They aren’t paying for their mistakes, we are.
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That’s true there is such a fee. Here is a link to a story about it.
http://quinnscommentary.com/?s=Reinsurance+fee&submit=Search
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