Posted on 05 Apr 2010
On March 23, 2010, President Obama signed the U.S. health care reform bill into law. All individuals are required to obtain health insurance under the law, and firms that do not provide medical coverage may face heavy per-employee fines.
The $940 billion dollar reform bill is expected to extend coverage to at least 32 million Americans, and stipulates that insurance companies cannot deny coverage to those with pre-existing conditions. It also allows individuals to remain on their parents' plans until age 26.
"The legislation just passed by Congress is a step toward real reform," notes Linda Havlin, Global Leader for Research and Intellectual Capital, Mercer's Health & Benefits business. "Clients are concerned about potential additional costs related to expanded eligibility and benefits, compliance and administration.
And there are actions at the state level that add additional complexities to their current health care costs and expense. Quite frankly, they feel that reform helps access to coverage, but it's the same high cost coverage we have today. Subsidies will simply soften the blow. Employers will be forced to find their own solutions to improve outcomes and make their health plans more cost effective."
Marsh's U.S. Health Care Practice Leader, Holly Meidl, agrees. "The idea is that we're going to force the individual to buy coverage so that the spread of risk is maintained for the insurance carriers. With that, the insurers can then do away with exclusions for pre-existing conditions, limit rate increases for overutilization, and write to an 85 percent medical loss ratio – and it works actuarially because they now have 31 million more customers. But there's no guarantee they will get those extra customers. The penalties for not buying insurance are very low.
"Also there is concern among providers that, with the new system in place, they will be treating more patients, and actually receiving less money per patient than they do today," adds Meidl.
"Currently, providers are reimbursed for insured patients, which helps to subsidize the costs of uninsured patients. Providers fear that insurers will drop reimbursement rates to government-payer levels, with the argument that the cost shifting is no longer needed after reform. The result could easily be that total provider revenues drop below current levels while demand moves to record highs. The issue of an unsustainable system remains, but this time, the squeeze on the provider could be life threatening."