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Thursday, October 17 2013

Do health insurance refunds teach to overcharge?

The Affordable Health Care Act forces health insurance companies to issue refunds if they do not spend a certain amount of premiums on costs.  However, if the health insurance company does not charge enough premiums they cannot send an extra bill. 

 

During the past months, individuals have started to receive notices regarding refunds.  The stories I have heard are taxpayers receiving minimal refund checks after 20%+ premium increases.

 

Since health insurance companies cannot ask for additional premiums if they undercharged, but can issue refunds if they overcharge; does the law encourage the companies to overcharge?  Additionally, since the law mandates individuals to purchase health insurance did we just create an uncompetitive environment?  This allows the health insurance companies to have pricing power.

 

With relatively few health insurance companies with strong pricing power and an incentive to overcharge we have created a powerful oligopoly.  An oligopoly is like a monopoly, but with just a few companies instead of just one (think oil companies).

 

At least no one can be denied coverage, but I have a feeling, economically speaking, the consumer has lost the first few battles.

IRS Circular 230 disclosure:  To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

Posted by: Mark W. AT 11:00 am   |  Permalink   |  Email

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IRS Circular 230 disclosure:  To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used,
and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


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