travel loss ratios, a metaphor

Nick Dawson
Jul 25, 2017 · 4 min read

So, let’s imagine you and some friends want t take a summer vacay trip. Suns out, guns out, etcetera etcetera. You decide to kick it old school. You use an OG travel agent. So you go to this travel agent and you’re all like “hey, I want to go across the country for some sand and some shade.” And the travel agent thinks for a second. In their head they do some quick math: ‘$100 for a plane ticket, $5 to keep the lights on this month, $5 for my salary today, $5 for our computer system and $5 for taxes this year.’

“OK,” they proclaim, “that’ll be $120 please.”

This, generally works. We generally agree the friendly travel agent has a right to make a profit and cover overhead expenses. Unfortunately, our travel agent has just be bought by a huge company which provides travel services to many employers and individuals in different states.

Somewhere, deep inside the inner-workings of Travel Inc, there’s a conversation that goes like this:

“Wait a gosh-diddly-darned moment! You mean to tell me every time we sell a $120 trip, we LOSE $100?”

“Well, Mr. Pinstripe McCFO, that’s the cost of the actual travel.”

“Exactly! That’s our loss. We are losing $100 of what should be ours to the service the customer wants. We brought the traveler to the airline. We cannot endure this kind of travel loss!”

“Ok Mr. Pinstripe Baldy McCFO, what should we do?”

“I got it!,” he (and we all knew it was going to be a he, right?) shouts, “we keep even more of that money! We earned it. We bring the travelers to the airline. They *need* us!”

The travel agent speaks up: “but if we do that…won’t the traveler have to pay more when they get to the airport? Won’t they owe more for the ticket?”

“Let me explain something to you,” and as he starts, he props one polished shoe up on the edge of a nearby chair and leans forward over his knee, “that sounds like what I call a ‘they problem and not a me problem’.”

Now, with the new policy in place, Travel Inc still charges $120 for travel assistance. But in an effort to minimize their Travel Loss Ratio, they keep $80 of the $120. They give the airline $40. So now when you go on your flight, you get to baggage claim and instead of your bag there’s a big Balance Due sign. You inquire and learn you still ow $60 for the flight you just took.

Cool or uncool?

Ok. Re-read this and replace every instance of Travel with Health Insurance.

Travel Loss Ratio is actually something called Medical Loss Ratio. It’s the amount of a premium (what we pay monthly for an insurance plan) that the insurance company LOSES* to paying medical bills (vs keeps as management, profit and overhead and marketing, etc).

(*their language, not mine.)

Until seven years ago, there were no regulations on Medical Loss Ratios. Want to keep 60% and pay doctors 40%? Do it dude!

For the last seven years (generally), at least 80% of what you pay for insurance has to go towards actually paying for your health and wellbeing and the management of your care. And, if it doesn’t they owe you a check. Those checks got mailed! https://boss.blogs.nytimes.com/…/the-affordable-care-act-…/…

To that one might say, “dude, chill, capitalist gonna to capitol, right? Don’t hate the playa…”

And one might think: ‘Woah! Whadday mean that loser house on the other side of campus only keeps 2%? You can’t buy the dank beer with that. Who pledges Medicare anyway?! Olds and uncools, right broseph? *fist bump* (But seriously broson, how do they run their parties so cheap?… I’m kinda jelly!*) ‘

To which I say: “I am totes with you brah! But check it, those other dudes won’t tell you how much they are keeping and how much goes to the service you thought they were going to pay for you on your behalf. That’s like sending a pledge with enough dough to buy a keg and finding out you owe the beer company more money after you’ve chugged the brewskis. Not chill, not chill at all bro!”

Right now, there’s a bunch of broskis just chillin, shooting the ____ in the basement of their frat house in DC. And they’ve got this wild idea that removing the limits on what insurance companies have to pay is a pretty chill idea. I mean, it helps out their buddies in those companies and they throw mega ragers…mega!

But, if you are like me, and you’d like to sleep easier knowing most of what you pay for insurance actually goes towards paying your medical bills when the time comes, then now’s the time to pick up the phone.

You could call your senator and ask them what they are doing to maintain the requirements around Medical Loss Ratios; to maintain the controls that promise what you pay for insurance ultimately pays for your care. If you voted for you representative, tell them how important it is for you and your loved ones to know that most of what you spend on insurance is helping you and your family. If you didn’t vote for you representative, call and ask them what they are doing to prevent this. Let them know that’s important to you. You could also ask to speak to their health policy lead.

If this isn’t important to you, that’s totally ok. The good news is that most of us are blessed to not have to have find out what life is like with a chronic condition, devastating illness, or significant financial hardship. But social science says most of us are within 3 hops from knowing 1,000 people. And we know rare diseases alone show up in about 6%-8% of people. That means like 60–80 people in your life know too well how important this is. If that matters to you, make the call for them.

{* does anyone say totes or jelly? I didn’t do much colloquial research for this, favoring instead actually facts and policies. I don’t really know how the youths talk. Do they even talk? Is it all snapchat these days?}

Nick Dawson

Written by

Former hospital admin. Now focused on patient and staff experience. Believes in patient designed care. Eats plants not pigs. Skis backwards. Golden Gopher. ENFP

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