Maximum Sustainable Benefits for Profits of 5 Percent

Insurers' Maximum Sustainable Benefit For Profits of 5% ($MSBP5_N$) are the highest portion of a premium dollar insurers can pay, throughout the year, and match $PI$'s probability (0.8413) of profits of at least 5%. To adjust for differences in PLRE variability, $MSBP5_N$ = 0.8000 - 1 * $\sigma_{e_{N}}$ because PLREs above 0.8000 do not yield these profits. Table 1 Row 11, shows $MSBP5_{NHI}$ = 0.79715 and $MSBP5_{B}$ = 0.78419. $NHI$ and $B$ can pay higher benefits than $PI$ (0.7500), but $MSBP5_{D}$ = 0.6419 and $MSBP5_{E}$ = 0.3000. $E$ must cut $PI$'s benefits by 60% because it is so inefficient.

Table 1 Row 12 shows dollar values of average policyholder benefits ($MSBP5_N$ * $4,000). $NHI$, $B$, $PI$, $D$ and $E$ can provide average benefits of: $3,189; $3,137; $3,000; $2,568; and $1,200. Contrary to capitation advocates' claims, these are reduced benefits, cuts in medically necessary and appropriate care due to providers' inefficient insurance operations, not capitation induced savings from increased clinical efficiency.