The proposed reduction in health insurance reimbursement is a key issue that affects a great portion of interests. Even within the government dockets, it is recognized that more time is needed to create sustainable strategies before enacting such a measure (The Medical News, 2010). KHN (2010) says that “the ability to balance long-term objectives with the immediate effects of cuts is a sensitive matter”.
Policymakers have to make well informed judgments when trying to reduce healthcare cost or end up oppressing private insurance companies. The impact of the proposed law makes these firms spend sleepless nights deliberating on how to deal with anticipated outcome.
This paper illustrates the burning issues with the proposed reimbursement cuts in regard to profit making insurance companies. In addition, the paper gives certain measures which private insurance companies may employ in order to absorb the effects of proposed cut. These measures are constructed with financial, legal and alternative health care models objectives in mind.
The proposed health care reimbursement cuts have several issues with insurers. Before the passage of health reform bill, stakeholders belonging to “America’s Health Insurance Plans (AHIP)” had put forward three alternatives of ‘strengthening and clarifying’ guidelines concerning the “grandfathered plans” (Pecquet, 2010). This would have excluded health insurance companies from major changes.
As Pecquet (2010) puts it, AHIP had viewed that “insurers ask regulators tasked with watching changes to insurer plans for greater “permissible cost-sharing changes” because “the regulatory threshold plus medical inflation doesn’t keep up with rising medical costs” (KHN, 2010). In addition, they proposed lobbying to permit regular adjustments to “prescription drug plans” and request extended guidance and suppleness in new guidelines.
This health reform law promotes restriction of tax deduction for “executive pay for insurance company executives” (Smith, 2010). The guideline is to affect all health insurance companies that make twenty-five percent or above in premium returns from medical plans, cutting the deduction to six hundred thousand dollars from one million dollars on income of every employee. It represents a 40% reimbursement cut. This measure, combined with the elimination of the provision on performance-based pay outs only leads to more payroll taxes for private insurance business (KHN, 2010).
The guideline would also do away with the ancient immunity for numerous performance- based pay, like stock options and bonuses accrued every year as well as tax-deferred compensation. The disbursements differ on yearly basis depending on what the business attains in its monetary objectives. According to Smith (2010), “the average pay for health insurance company CEOs in the U.S. in 2009 was $11.5 million”.
A number of democratic parliamentarians had tried to influence “Health and Human Services Secretary Kathleen Sebelius” on how insurer’s expenses could be tabulated towards a calculation of health insurance medical loss ratio, “or the amount of premium revenue that is consumed in health care” (Haberkorn and Kliff, 2010). The new guideline views that “federal and state taxes and licensing or regulatory fees … “should be excluded from the premium revenue number, or the MLR denominator” (Haberkorn and Kliff, 2010).
Those who worked on the language of this law argue that “their intent when writing the bill was that only the federal taxes and fees ‘that relate specifically to revenue derived from the provision of health insurance coverage that were included in the PPACA’ should count as medical expenses” (Haberkorn and Kliff, 2010). This view would automatically create trouble for insurers.
Cutting reimbursement rates will lead to cost shifting. Since the reimbursement cuts will affect physicians as well, there is a likelihood that people with insurance cover are going to be charged more and the insurer is expected to meet the cost. The government puts no incentives to health workers and thus, they keep on charging insured individuals more. As a matter of fact, insurers are complaining stridently about the higher payments demanded by hospitals and some physician organizations (Phillips, 2010).
And, as doctors charge more, the premiums are going to be costly and individuals may be unable to afford health insurance. The seniors in our country are going to be adversely affected. This may lead to high expenses since the customer base is small and the risk is spread over a small number of people.
Policymakers need to incorporate estimates of the magnitude of cost shifting into making decisions on Medicare and Medicaid payment rates. The high premium prices will translate costly products, less wages and small profit margin in general (KHN, 2010).
This problem cuts across various organizations and business. Everybody is worried of the implications of health reimbursement cuts since it will affect workers as well as employers.
The new regulation forces businesses with more than fifty employees to give medical insurance or pay two thousand dollars for every full time employee if any worker gets premium tax via health insurance exchange (Haberkorn and Kliff, 2010). Firms with less than fifty workers are not affected.
A great deal of medical cost is currently attributed to extended care maintenance of chronic illnesses and the trend is not being addressed either (KHN, 2010). More energy should be focused on preventive care in order to realize viability of United States health care system.