Originally Posted by BigCatDaddy
No, it's not. Only 80% of the extra premiums would be paid to consumers. So the company is still keeping 20% of the raised premium. It's not a dollar in dollar out match.
100% of the new premiums would be used to recoup the losses from paying old premiums in your example. Thus, 0% are used on health costs and so it all has to be paid right back out. Every new dollar of premiums gets paid out in rebates.
Another way of thinking about it is this: any subscriber premiums in excess of 25% of health costs have to be reimbursed. Without changes to those costs, it doesnt matter how much you increase premiums, it all has to be reimbursed.