The recently passed health reform legislation includes payment changes for insurance companies that seem intended to move the industry from risk avoidance to increased cost management.
"Many of the provisions (in the health reform bill) are attempts to deal with perceived issues or defects in the marketplace," said Joel L. Michaels, partner-in-charge of the Health Industry Advisory practice at law firm McDermott Will & Emery's Washington, D.C. office. "There has been a tremendous emphasis on transparency."
Michaels, who serves as co-chairman of McDermott Will & Emery's Insurance/Payers Affinity Group, said the segment of the legislation dealing with insurance market reform includes such measures as the elimination of pre-existing conditions, a prohibition on rescissions, guaranteed issue and the ability to renew a policy, the elimination of annual and lifetime coverage limits, prohibitions on excessive waiting periods, transparency, medical loss ratios and rating requirements.
Michaels is also skeptical that penalties for employer health insurance coverage mandates will have the effect Congress intended. He questioned whether the penalties would force employers to provide coverage.
On the other hand, individuals who don't purchase health benefits by 2016, the first year that the mandate is fully in place, will be fined $695 or 2.5 percent of their income for not complying, officials say, making it more likely they will purchase coverage.
Cuts to the Medicare Advantage program in the legislation are also of concern to some observers. Donald Crane, president and CEO of the California Association of Physician Groups, says the cuts might hurt more than just insurance companies.
Crane considers the cuts to Medicare Advantage to be contrary to patient-centered care, undermining a program that delivers what he calls "high quality, coordinated care" for the 32 million seniors currently enrolled in Medicare Advantage plans, including 1.5 million seniors in California.
"A person without insurance often postpones preventive and primary care and many seniors who have coverage find it difficult to navigate the system," Crane said. "Instead of spotting a problem early on when it's inexpensive to treat, that person may end up in an emergency room with a serious condition and enormous bills. If the patient couldn't afford insurance, they certainly can't afford that hospital bill."
Every taxpayer absorbs those uncollected costs, said Crane.
"We are concerned about the rationale for cutting the successful Medicare Advantage program, but what's important about reform (in general) is that it could ultimately embrace the type of delivery model needed to achieve long term affordability, stability and quality," Crane said.