Industry players in the US
have reacted pragmatically to the ACA, according to a poll
undertaken by Life Insurance International. President Obama has
said that ACA means that from 2014, the 30 million Americans who do
not yet have health insurance, will have access to “affordable”
private health insurance plans.
The legislation was signed
into law in 2010, but opponents of the reform had argued that the
law’s individual responsibility provision exceeds Congress’ power
to regulate interstate commerce because it penalizes
“inactivity.”
Go deeper with GlobalData
Republican presidential
contender Mitt Romney has even vowed to act to repeal ACA if
elected US president.
Leslie Levinson, chair of the
Healthcare Practice Group at law firm Edwards Wild-man Palmer, has
been following developments over the last two years.
He says: “Many had already
accepted that change is coming, and whether the court threw out the
law, in whole or in part, people were already moving in a direction
to do things differently, recognising [as in the UK] that the way
of delivering healthcare on a traditional basis has got to
change.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataConstructive
This view is echoed by Joseph
Marinucci, a director at Standard and Poor’s, who says: “Health
insurers have for the best part been focused on implementation and
have generally been constructive.
“Obviously they’ve voiced
concern, but over the past couple of years the bill’s been law,
and, for the most part, health insurers are in a better position to
clarify strategy and focus on near term operational
priorities.”
Robert Zirkelbach, press
secretary for American Health Insurance Plans (AHIP), the national
trade association representing the health insurance industry in the
US, said the ACA expands coverage to millions of Americans, and
“that’s a goal that our industry has long supported”.
However, he warned that the
legislation also contains major provisions that will increase the
cost of healthcare coverage for consumers and employers. “That’s
the opposite of what healthcare reform is supposed to accomplish,”
said Zirkelbach.
One of the challenges involved
with ACA is that it requires that each insurer must meet a medical
loss ratio (MLR) to ensure affordable premiums and consumer
value.
Large group health insurance
issuers must spend at least 85% of premiums on direct medical care
and quality activities.
Meanwhile, small and
individual group issuers must spend at least 80%of premiums on
direct medical care and quality activities. If an insurer exceeds
the target ratio, it must provide the consumer with a rebate for
the amount in excess of the ratio percentage.
Eric Fader, counsel at Edwards
Wildman Palmer, says the MLR requirements are “probably the least
popular aspect of the ACA” for insurance companies.
He points out that while some
insurance companies were already complying with the requirements,
smaller insurers, or those offering products in niche markets and
insurers in less populated areas, are likely to have “difficulty
spending less money on overheads”.
In addition, says Zirkelbach,
the law will limit the variation between premiums based on age:
“Right now a 60-year-old is paying five times or more what a
20-year-old is paying for coverage. The law’s limiting that to
three to one, meaning that younger people are going to see their
costs go up quite significantly. And that increases the likelihood
that they’ll simply pay the penalty and wait to buy insurance until
they need it”.
Rising
costs
Matt Wiggin, head of public
affairs at health insurer Aetna, says its primary concern with the
MLR is that it does nothing to control rising medical
costs.
These, he says are the primary
drivers of the premiums people pay for their insurance. In
addition, “the MLR also limits insurers’ ability to invest in
programmes and services that could help improve health outcomes,
and the cost of health care,” says Wiggin.
Zirkelbach says a major
concern is that the legislation focuses on expanding coverage, but
does not really focus on those underlying medical cost
drivers.
Another issue adds Zirkelbach
is that the costs of medical care and medical technology are rising
at “an unsustainable rate”.
This situation means a large
chunk of federal and state budgets are consumed, and burdens
employers.
Zirkelbach says: “So as the
debate here in Washington progressed, it shifted away from
comprehensive reform …and shifted solely to insurance reform and
expanding coverage.”
