Will Consumers Be Hurt By Obamacare?

Politicians, commentators, business leaders, and common Americans have argued to death what Obamacare will mean for America, questioning whether it will expand the powers of the federal government too far, or hurt small businesses, or put a heavy burden on the country’s finances. But one thing is clear: health insurance companies will have to reinvent themselves, and re-price their services to comply with the requirements of this healthcare reform.

The requirements of the Affordable Care Act, which was championed by President Barack Obama, will bring sweeping changes to healthcare in the United States; insurers can no longer deny coverage due to preexisting conditions; preventative care and wellness screenings are now available at no additional cost; lifetime dollar limits on health plans have been eliminated; and superstore-like state health exchanges are meant to make shopping for health insurance easier and more affordable.

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“It’s an enormous change,” Tom Billet, a senior consultant for the risk management firm Towers Watson, told Bankrate. An enormous change that will likely trickle down to consumers. As insurance policies change, patients may experience short-term price increases and perhaps some confusion during the transition. But health insurance in America was never a static entity; over the past several decades, the system has evolved. In that time frame, health insurance transformed from a small industry that primarily designed group plans that employers offered to workers, to one that was suited to the early detection and treatment of chronic diseases.

The focus on more expensive care has, in part, caused the number of employer-sponsored healthcare plans to decline. The percentage of Americans covered by health insurance at work has fallen from 64.4 percent in 1997 to 55.1 percent in 2011, according to U.S. Census Bureau figures. And insurance companies have decided that they no longer want patients to wait for an emergency before going to the doctor. “The healthcare system was largely focused on acute care,” Susan Pisano, a spokeswoman for America’s Health Insurance Plans, an industry trade group, told Bankrates. “You broke your arm, went to the doctor, and got it set.” Insurers now believe that detecting and treating diseases early can bring long-term savings that compensate their investment in “free” preventative care.

Obamacare’s implementation has come amid this gradual transformation. The Affordable Care Act, which requires most Americans to obtain health insurance beginning in 2014, will bring insurers an additional 30 million new customers, and the insurance industry that has been focused on selling group plans to employers will now need to recreate itself to cater to a new market of individual consumers. Billet said that insurers are still not sure how expensive it will be to provide healthcare to these new customers, many of whom are not working and have not been insured for a long time. These issues could result in higher rates from providers, at least initially. “Being able to accurately price and run plans without dramatic premium increases in the first few years would be the biggest challenge,” he added.

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But not all health insurance companies will be able to enter the lucrative new exchange market, because their health plans lack a “good housekeeping” seal, said Deborah Chollet, a senior fellow at Mathematica Policy Research in Washington, D.C. “To get into an exchange, a carrier has to be certified by the National Committee of Quality Assurance or other certification agency,” says Chollet. “With no incentive to do so, many insurers never gave a thought to certification.” To receive a certification, insurers need their quality to be rated by doctors and hospitals.

Because of the increased requirements of Obamacare, health reform has fueled a mania of mergers and acquisitions, and many large group insurers have acquired smaller carriers that cater to individuals.

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