7 Questions to Ask to Protect Yourself from Medicare Advantage Scams: Open Enroll Oct 15- Dec 7

[thesquanderer]

6. re: "they wouldn't be spending so much on advertising"

I think I may have figured that one out.

At least since the Affordable Care Act, there is a limit to how much profit these companies can make (as a percentage of revenue), which was presumably done to put some kind of brakes on the sheer profit motive. BUT... marketing is an expense. So let's say their corporate profits are capped at 10%... but they discover they are on track to make 15%. They might have to give up that excess to the pool where excess profit goes... BUT if they instead spend that extra 5% profit on advertising, it's not profit anymore, it's an expense. So instead of "giving away" the excess 5%, they use it for marketing to get more customers. All that marketing, then, basically costs them nothing, because if they didn't spend that money on some legit expense, they would just have to give it up.

I think this is basically right, but it's only my own conclusion after reading some basic info about the profit structure of MA. If anyone has more detail (including correction, if I'm missing something), chime in...