>>‘I am not understanding this, but it sounds to me like 20% of premiums paid out should be coming back to policy holders?’<<
>Not like that. The companies, by law, must pay out a minimum of 80% of all revenues in claims, if not, the company must rebate any extra to consumers.<
so - what is not spent on claims, has to go back then up to 20% right?
‘so - what is not spent on claims, has to go back then up to 20% right?’
back up? I am not sure what that means. Imagine it as 80 cents out of every dollar paid out, by law, in claims. The company gets to keep 20 cents. Any more must be returned to the policy holder.
It is the death of private insurance. It destroys the profit margin of the industry and the commission structure for sales. The profit margin of the large insurance carriers is approx. 3 to 5% of premium or less. Now there will be little or no profit. The companies have already begun to drop out of the market. It is a matter of time until they all do if Obamacare remains law.