Sunday, May 30, 2010

Coming Soon to a Health Insurance Company Near You

The full effect of Obamacare (Patient Protection and Unaffordable Health Care Act) has not fully been scoped out yet. But over the next few months the early stages of Obamacare will be phased in.

First on the agenda is doc fix. In order to "not add one dime to the deficit" the folks in Washington voted to cut Medicare provider payments by 21% with the idea they would be added in via a separate bill that of course WILL add to the deficit.

So far they have not voted the "fix" so starting on Tuesday 6/1/10 Medicare providers will make a financial decision about Medicare patients. Will they continue to see them or not? Will Congress vote another spending bill to fix what they are taking away from the docs even though there is no money in the bank to pay the docs?

Then in June (or possibly July) the yet to be fleshed out national risk pool will hit the streets. So far DC has not told us what the benefits will be, what the premiums will be or which conditions are considered to be pre-existing.

But other than that . . .

Kiddie coverage enters the scene in September when carriers must cover all children under the age of 18 regardless of pre-existing conditions. No details on that one either but carriers are already hinting at much higher rates (possibly 3x current rates) and new restrictions on children's health insurance policies.

The next big roll out will be mostly invisible to the public but will create even more frustration for carriers, agents and those wishing to purchase individual health insurance in the open market.

Starting in 2011 the health insurance companies will be held to strict guidelines on payout to policyholders. Companies offering individual major medical coverage must return at least 80% of the premiums in the form of claim payments.

This should not be a big deal since most carriers are already paying out somewhere in that ballpark any way but it comes with some barbs. Washington has put carriers on notice that premium rate increases will be closely monitored and the requested increase may not be approved. They also have yet to fully define what will and will not be allowed in the loss ratio computation, nor have they dictated what will happen if the carrier misses the mark and only pays out 78%.

Claims are not an exact science but global claims can be predicted on a large block but even then, only to a point. Beyond that the only thing certain is that they will fluctuate.

A continued recession will put even more upward pressure which will make life miserable for all.

A mandated loss ratio may seem like a good thing but it has adverse consequences. If health insurance companies are required to pay out "X" but their premiums are limited to "Y" then they will have to find creative ways to stay in compliance.

Here are some things that will happen, some of them starting before January of 2011.

Carriers will look to cut administrative costs any way they can. This means fewer bodies in home office dedicated to underwriting and customer service as well as reduced hours. That translates into a longer underwriting queue on new applications, and much more difficulty on the direct human contact customer service side. Policyholders who want to talk to a live person will find restrictive hours and longer waits.

Many carriers will outsource a lot of their operations, including customer service, to overseas operations. This translates into more layoffs in the 57 states.

I fully expect underwriting will become tougher leading up to 2014 when carriers will be required to insure anyone regardless of their health. Medical conditions that can currently be covered will result in more declinations on submitted applications. In other words, if you have a pre-existing medical condition that is workable now you may not be able to find coverage at any price between now and 2014.

The Socialist ideal of providing health insurance for everyone while promising to make premiums more affordable is a cruel joke that was sold to the voting public as part of a campaign promise. The government already tried making home mortgages available to anyone regardless of ability to pay and we know how that played out. Now they want to do the same thing with health insurance.

Don't expect this movie to have a happy ending because it won't.
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