A post by Maggie Mahar on The Health Care Blog today tries to assess the short and long-term impact of federal health reform legislation on insurers. She highlights many of the same cost-driving changes I have tried to bring to light and rightfully questions the myth that the bill is a boon for insurers. This myth is not so much a myth as an intentional delusion that was needed to secure the bill's passage. You can find her post at www.thehealthcareblog.com.
Although she hits many of the right notes, I am not in full agreement with some of her conclusions. Her assertion that not-for-profit regional plans will fare better than national for-profits is unlikely to prove true. At Harvard Pilgrim we estimated that the value of the new premium tax alone would exceed our annual net income. Regionals will find it difficult not only to bear the cost burden but to increase premiums or convince providers that they must accept lower rates. Nationals will find more and more effective ways of spreading and passing along these new costs across multiple business lines. No amount of medical management will help regional not-for-profits withstand the new taxes and the Medicare cost-shifting built into the bill.
I also find it hard to believe that Congress will revisit the individual mandate and strengthen it. If anything, the political pressure will be to weaken it. The best we can hope for is that it stays as is, and I would not expect much improvement in the risk pool from the existing mandate. Massachusetts has an even stronger mandate yet is suffering from a post-reform cost explosion so great that the Governor, in frustration, has imposed arbitrary premium caps.
As for the prediction that the legislation will drive insurers to be more efficient, this is probably the case, but the savings will be a mere drop in the bucket of potential system savings. Nothing in the legislation addresses the true cost problems in the commercial sector - cost shifting from Medicare, hospital-physican consolidation, lack of transparency, and consumer unwillingness to accept limits on provider choice.