Health Reform Brings New Customers, Concerns for Health Insurers

Health Reform Brings New Customers, Concerns for Health Insurers

Joe Cantlupe, for HealthLeaders Media, March 23, 2010

Health reform could help the insurance industry more than any specific aspect in healthcare by drawing in tens of millions of new customers and billions of dollars of more revenue.

For many insurers, they are definitely keen on the idea of an individual mandate, which, estimates suggest, will bring 32 million to insurance, according to healthcare experts. The figures have certainly mooted criticism insurers voiced about the health bill in recent months.

Insurers say upcoming changes, such as covering pre-existing conditions are long overdue, but experts say insurers are concerned about unfolding regulations surrounding the legislation, and customers may face massive confusion as they all try to sort out specifics of new rules.

Experts also said that insurers are worried that while insurance will be required for all Americans, some people—especially the young and healthy—may forgo insurance altogether and just pay the annual penalty, less than $700 a year, leaving insurers in search of less costly customers instead of people who require more care.

Still, some insurers were more enthusiastic than others in reacting to the passage of the healthcare reform bill. However, the healthcare plans were steadfast in maintaining that the legislation doesn't address the underlying issues for real reform, such as medical costs.

Such provisions are "long overdue," and are of "historical significance," said David Corani, president and CEO of CIGNA Corp. But Corani was critical about the overall congressional action saying, "It is CIGNA's strong belief this law does not adequately improve quality and address the dramatic cost increases of our healthcare delivery system."

"In particular, we must change from pay per service or quantity to pay for outcomes and efficiency," Corani added.

The legislation channels $875 billion to expand insurance coverage over the next decade, with most changes slated to begin in 2014. The bill eliminates pre-existing conditions from coverage decisions and provides full coverage for preventative services.

America's Health Insurance Plans (AHIP), the insurance lobby, believes that the coverage expansions included in the bill represent "a significant step forward," said Karen Ignagni, president and CEO in a brief statement after the House vote. But AHIP also expects the legislation to "exacerbate the healthcare costs crisis facing many working families and small businesses," Ignani said.

In recent months, AHIP had worked against the legislation after initially favoring it. A few days before releasing Ignani's statement, AHIP criticized the legislation as lacking a "system-wide approach that would actually bend the cost curve downward." AHIP also said the legislation would "encourage people to wait to purchase coverage until they are sick, which unfairly penalizes those who currently have coverage."

The AHIP statement noted that 23 million Americans would remain uninsured once this bill is fully implemented.

A key moment in the Obama administration's effort to rally public support for healthcare reform came earlier this year when it was disclosed that Anthem Blue Cross proposed a 39% rate hike in the individual market in California.

Kristen Binns, a spokeswoman for WellPoint, owner of Anthem Blue Cross, said the company is "extremely pleased to see that more Americans will now have access to coverage."

Saying that the priority is meeting the "healthcare security needs" of the company's 34 million members, Binns added, "We remain concerned that the bill passed yesterday does not address long-term cost containment measures that will make the system sustainable."

There are also issues about how to educate consumers about these changes. Fred Karutz, general manager of health plan solutions at Silverlink Communications, predicted there will be "mass confusion, for employees, members, and providers about how the new rules apply" for insurance over the next few months.

Insurers will need to undertake a "multi-faceted communication approach, providing each constituency a road map of change, and how to access the latest information," Karutz says.

Among the changes for health insurers are rules that could drive smaller insurers out of business, according to conservative commenter Edmund Hasilmaier, senior researcher for the Heritage Foundation's center for health policy. Creation of state-run exchanges in the bill potentially undermines insurers' ability to have flexibility in underwriting and other matters because the government may have final control on types of coverage in a market, such as excluding insurers from some exchanges because of cost, he says.

Hasilmaier adds built-in regulations within the new measures may result in a stranglehold on the industry, as a "regulated utility with a limited rate of return with very few players" in a position to make profits.

Hasilmaier says young people not buying into the health insurance system could "exacerbate everything they are trying to fix."

While some insurers oppose reform and some are mixed, Kaiser Permanente of California has been one of the most enthusiastic supporters.

"Reform will make history and improve lives in some important ways," company spokeswoman Trish Doherty said. "This legislation also would establish a number of important principles that, over time and with continued refinement, should improve the functioning of the health insurance market and healthcare delivery system."

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