Health Care Reform: Understanding the Law Dividing the Nation, Pt. 2

Last week, AskDrManny.com introduced the first of a series of articles on the state of the health care reform law dividing our nation.  That first article defined the provisions – that are currently in effect – meant to increase consumer protection.This week, we’ll continue with the provisions meant to “hold insurance companies accountable.”  Both have been in effect since January 1, 2011.

Bringing Down Health Care Premiums

This provision requires that at least at least 85% of all premium dollars collected by insurance companies for large employer plans are spent on health care services and health care quality improvement. Individual and small employer plans must spend at least 80 percent of premiums on benefits and quality improvement.  According to the government, before the Affordable Care Act most of the money collected from premiums was spent on administrative costs and profits such as executive salaries, overhead and marketing.  Now, if those administrative costs and profits are too high, and insurance companies cannot meet the percentages, they must give customers rebates.

However, as was reported in the New York Times, premium costs have continued to rise – especially for small business workers.  This year, groups of more than 20 workers have seen premiums increase by 20 percent.  Smaller groups have seen increases of 40 to 60 percent or more.  Meanwhile, the health benefits from these plans are decreasing.  The GOP says this is evidence that the Affordable Care Act includes too many expensive features, which are driving up premium costs.  The insurance industry blames the underlying cost of care and the growing demand for it.  Effective January 1, 2011.

Addressing Overpayments to Big Insurance Companies and Strengthening Medicare Advantage

According to the government, Medicare pays Medicare Advantage insurance companies over $1,000 more per person on average than is spent in Traditional Medicare, which causes premiums to rise for all Medicare beneficiaries, including the 77 percent of beneficiaries who are not currently enrolled in a Medicare Advantage plan. The Affordable Care Act aims to knock out this discrepancy but still provide people in the Advantage plan with all the guaranteed Medicare benefits.  Additionally, law provides bonus payments to Medicare Advantage plans that provide high quality care.

The website HealthReformReport.com points out the infeasibility of this provision.  Providing more (or even equal) coverage for a lower price?  It sounds impossible – and, likely, it will be.  HealthReformReport says the cuts to Medicare Advantage will not only result in lower value services for enrollees, it will also raise premiums, deductibles and co-payments significantly.  Poor and minority groups will likely be the hardest hit – on average, Hispanic and African-Americans are 10 percent more likely to be enrolled in the Medicare Advantage plan.  Read more here on the statistics.

Meanwhile, the nonprofit seniors advocacy group, AARP, which supported the reform, has recently come under fire.   According to House Republicans, the AARP supported the reform bill despite $155 billion in cuts to private Medicare Advantage plans over 10 years because it stood to profit if enrollees switched to AARP-branded Medigap coverage.  The AARP denies the accusation.  Read more here at the Seattle Times. Effective January 1, 2011.