PPS. Initial Denticare Rates

Just one quick technical note, re. yesterday's and today's denticare posts. Once the non-profit public dental insurer had operated for a year, it would have a good idea of costs and revenues, and thus the appropriate rates to charge. Another year, two at most, and one would think it would have worked out all the kinks and calculations, whence my proposal that public-private competition be restrained for three years, initially. But how to calculate the rates in the first year? The generally accepted minimal nominal profit margin, in business, is 100%. Minimum. After one has calculated the costs inherent in the production of any good or service, the real profit margin is usually somewhere between 10-33%. When calculating the public insurer's rates for the first year one is also mindful of the need to make a splash and convince those of sufficient means but without dental insurance that the cost is low enough so as to be a worthwhile investment, such that their adherence to the insurance is as enthusiastic as that of those who are fully or partially subsidised, guaranteeing maximum market share asap. Hence, given the 100% nominal margin, one is tempted to offer rates 50% lower than the lowest market rate, right off the bat. However, as a stand-alone self-funding non-profit, while working out the kinks, the public insurer might run the risk of having initially overcalculated the savings dictated by its structure. To maintain enthusiasm and momentum for the programme, it is best if its rates can be shown to decline on a yearly basis, rather than rise as a result of miscalculation after one year. Yet the rates must be low enough to make a splash. Hence, I would guess that initial rates set at 30% lower than market rates would be prudent, a big enough savings to enthuse clients and to forestall predatory pricing by private insurers, ready to take a short-term loss in an attempt to discredit the public insurer in the first year, with a view to forcing it out of the market. Given the market imperatives of private insurers, while one can imagine them dropping rates by 10-20%, 30% would probably be a bridge too far. It would of course be all to the good of citizens if private insurers did drastically lower their rates, that is the whole point, but honestly, and not as a means to abort the nascent public insurer.