Yesterday, I attended the Traveling Seminar in Atlanta put on by the Conference of Consulting Actuaries. Well, actually, I instructed for part of the day and attended for part of the day. It's a really good day of continuing education and I would highly recommend it even if I am one of the instructors. You can read more about here so that you can see why perhaps you should attend a Traveling Seminar next year.
But, that's not my point in this post. I'll get to that in a second. One of the four sessions yesterday was on health care in the US, essentially health care reform, PPACA, or whatever glorious name you might choose to attach to it. As I listened, I noticed some analogues between the Dodd-Frank Act that was intended to keep the financial services industry in check and PPACA which among other things appears intended to keep the health insurance industry in check.
So, I digress. Dodd-Frank created lots of new rules. In fact, 2800 pages or so of legislation has a tendency to do this. Among other things, it restricted some of the practices of the banking industry that lawmakers had judged were pretty nefarious. The banking industry saw that its profits, especially on the retail side were declining. So, what did the banks do? They started to put more and different fees in place. Some of them, such as the $5 per month (that was usually the number, I think) fee for using your debit card even once, faced public uproar and outrage and were repealed. But, they are finding other ways that will not be so in your face. If you ever find out about them, you won't like them, but chances are that you can't find out whether they are in your bank's disclosures or not.
So, what does that have to do with PPACA? Well, the more I listened to yesterday's presentation, the more I heard about health insurers losing some of their margins. And, many of them have shareholders to report to. And, those shareholders expect profits. And, the profits may be ready to decline. So, my message to you is that since the health insurers can't easily deal with declines in their profits, they'll have to get them back somewhere ... somehow.
So, ladies and gentlemen, I don't know how they will do it. But, hold onto your wallets. The insurers need their profits. They are in business, after all, to make money.