Health insurance companies are not spending as much money as expected. While COVID-19-related costs are up, the cost savings from people foregoing or delaying elective care has more than offset the COVID costs. Health insurers are refunding much of that savings to their enrollees. However, this is due to a provision of the ACA that limits insurers medical loss ratio to 80-85% of premiums depending on plan type. Is this an argument that government needs to regulate insurer profits?
Perhaps not. Michael Cannon from the Cato Institute, examines the case of car insurers in his post “Darn Those Greedy Insurance Companies“
Similar to health insurers, auto insurers are saving money because people are driving less. The Wall Street Journal reports, “Allstate Chief Executive Tom Wilson said mileage was down ‘an unprecedented’ 35 percent to 50 percent across the U.S. since mid‐March, including in states without shelter‐in‐place restrictions.”…Less driving means fewer accidents, so claims have likewise fallen as much as 40 percent.
What are greedy insurance companies doing with those windfall profits? They are issuing refunds.
Policyholder‐owned American Family Mutual Insurance is refunding $200 million to policyholders. Publicly traded Allstate is refunding $600 million to customers. American Family COO Telisa Yancy explained, “It is real dollars we expected to pay out this year and no longer have to pay out. We are sharing it back right now when our customers probably most need it.”
….Darn those greedy insurance companies.
When there is trust and businesses and customers act with civility and honesty, capitalism works.