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Obamacare could lead to fat fines
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Here is an interesting headline from the Insurance Journal: "The Hartford to Return $48 Million in Florida Workers' Comp Profits." According to the article, "Florida officials said that Hartford Financial Services Group will issue refunds or credits totaling $48.2 million to Florida businesses for excess profits the insurer earned on policies written from 2004 to 2006." The Hartford would love to keep these profits, but Florida "has an excess profits law that limits the maximum underwriting profit insurance companies can generate over a three year period."
The good news is, loss prevention and safety efforts can work. A Hartford spokesman stated that "the combination of these loss prevention efforts, along with The Hartford's strong workers' compensation underwriting and risk selection in the state, resulted in lower claims costs." The Hartford essentially collected more premium than it paid out. This could translate into reduced rates in the future.
Of course, OSHA would like some credit, too. They, after all, help businesses minimize their losses by enforcing job safety regulations. One could argue that The Hartford's loss prevention and safety efforts would not be as effective without the assistance of the federal government.
Construction companies are quite familiar with OSHA. Inspectors representing OSHA often show up at their job sites to make sure they are following federal safety rules. If they are not, they can face a hefty fine. Contractors thus have a financial incentive to comply with the law.
Let's turn to health care.
President Obama is seeking to constrain the underwriting and risk selection practices of health insurance companies. He wants to prevent insurers from excluding preexisting conditions and nonrenewing unprofitable cases. With a reduction in underwriting capacity, health insurers will likely increase their focus on loss prevention. This is especially true if they have a premium cap.
If voluntary loss prevention efforts fail to maintain favorable medical loss ratios, private health insurers might welcome federal wellness mandates as a means of restoring underwriting profits. Perhaps we will have an opportunity to earn individual tax credits for improving our health in the future. On the other hand, the federal government could also start assessing fat fines to those who fail to meet federal fitness standards.
