Right from its inception, the Affordable Care Act, widely
known as Obamacare, has faced strident criticism. The new act has
resulted in a range of reimbursement reductions, tax hikes and a
plethora of new regulations.
Tax hikes is one area which has been difficult to ignore.
Several patients have to deal with new payroll, capital gains and
excise taxes. Meanwhile, hospitals and medical practitioners are
already feeling the effects of a 2.3% tax on the gross income of
medical device companies. These additional costs would possibly
be passed onto customers.
Now more fuel is being added to the fire, via the sequestration.
Of course, several conservatives have indicated that $85 billion
worth of budgetary cuts are a mere 2% of the entire federal
budget. But when seen from the perspective of its impact on
healthcare, doctors and patients alike are sure to face severe
The other significant reason expected to make health insurance
unviable is what is being described as premium rate shock. This
is expected to take effect in 2014 as the new Act is implemented
nationwide. As more and more of the uninsured are given
healthcare coverage, there will be steep hikes in insurance
premiums. This prediction was made by an important figure in the
insurance industry, Mark Bertolini, CEO of
Speaking at an investor conference, Bertolini said he expected
premiums to increase by 20% to 50% in 2014, before government
subsidies take effect. In fact, he expected rates to increase by
100% in some markets. Blue Shield of California also has similar
views. According to a report in
The Los Angeles Times
, it is looking to raise rates from 12% to 20% for 300,000 or
more individuals. The company has declared that these rates would
take effect by March.
There are complaints on the insurers' side as well. Insurance
companies have been drawing attention to the proposed reductions
to Medicare Advantage plans. The Obama administration has said it
may reduce payments to Medicare Advantage plans next year. A 7%
to 8% reduction in payouts could mean a significant jump in
premiums. This, is turn, could lead to a reduction in services to
senior citizens or lowered access to plans.
However, evidence on the ground tells us a different story.
Applications from insurers wanting to get into the Medicare
Advantages domain have risen by more than 50%. Data from the
Centers for Medicare and Medicaid Services show that 48
companies' applications have been filed this year, compared to 31
in 2012. Of course, these applications are from parent companies
which offer more than one health plan.
Apart from Aetna,
UnitedHealth Group Inc.
) all offer Medicare Advantage plans. Others like Health Care
Services Corp, which offer Blue Cross and Blue Shield plans in
Illinois, Texas and New Mexico, are also looking to offer more
Medicare Advantage plans or widen their reach. The fact that they
are new to this business doesn't seem to be acting as a
deterrent. In fact, the company has applied for more plans under
Medicare Advantage in Oklahoma and is expanding service coverage
in New Mexico.
Even so, governmental reductions are being viewed as detrimental
to the adoption of Medicare advantage. Health insurance lobby
America's Health Insurance Plans recently claimed in a report
that the cuts could result in an increase in payments of $50 or
more for a citizen opting for Medicare Advantage.
The success of Medicare Advantage depends on a higher rate of
adoption. Optimism has grown with the program's recent monthly
contract reports predicting that enrollment may increase to 14
million this year from 12.8 million senior citizens in 2012. And
this is true for the Obamacare reforms as a whole.
The success of the program depends on a steep increase in
adoption and participation. Since insurance firms have been
prevented from refusing coverage, lower adoption will mean that
the plan covers only those who need it desperately. As rates take
a spike, the young and healthy would begin to opt out after
paying a $695 a year penalty by 2016. This is a bitter political
pill for anyone to swallow.
But there is growing optimism and action among citizens and
governments alike. Over the past few weeks, six Republican
governors have agreed to expand Medicaid coverage to their
states. And voluntary organizations such as Enroll America have
begun to play a major role in increasing awareness about the
In fact, Covered California, that state's health exchange,
will actually guide new applicants through the complicated
process of filling up applications. Surely, Obamacare's wide
adoption holds out hope for insurer and beneficiary alike.
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