How will the Senate bill impact health insurance companies and their customers?

Even better, how will it impact a not-for-profit health plan–one with a reputation for being a “good guy” that continually wins the country’s top awards for member services and with historic profits of less than 1% of premium? And, one that is operating in Massachusetts–a market that has already been through much of this?

I will suggest that, in combination, these are three intriguing questions.

That is why I thought that the Harvard Pilgrim’s CEO’s recent post on their website was important. It is short, direct, and to the point. And, from everything I know, it is bang-on.

Some samples:

From the look of the finished product, most of the [more recent changes to the Reid bill] were unrelated to health reform, since the changes to the bill itself were marginal. The individual requirement to purchase has been tweaked, but still fails to ensure that individuals cannot delay buying coverage until they need it. A new Independent Payment Advisory Board will be created, but because its recommendations are not binding, its impact on meaningful cost containment is questionable. The most significant additions are new provisions directed at health insurers, including minimum medical expense ratio requirements, and a back-loading of the health insurance premium tax, designed to delay inevitable premium increases…

The flawed structure of the bill is therefore retained, which means that expansion of eligibility and other reforms are largely delayed to 2014, but changes having the effect of increasing health insurance premiums will take effect prior to 2014. Before seeing any material benefits of reform, some will see their Medicare payroll tax rate increase, many fully insured subscribers will, beginning in 2011, see the effects of the health insurance premium tax, and everyone in the commercial market will see the cost-shifting effects of Medicare payment reductions and the tax on drug and medical device manufacturers. Medicare Advantage plan enrollees will also see sharp increases in premiums. Since there is no significant cost containment in the bill, these increases will occur on top of normal medical trend. And because the universal requirement to purchase coverage is weak, adverse selection will further increase costs starting in 2014…

Imagine how this plays in Massachusetts, where the insurance market is already reformed, the cost of health insurance is already high, and the major health plans are not-for-profits. The impact of federal health reform will be little more than higher premiums…

Our colleagues at the Massachusetts Hospital Association just released a “Health Plan Performance Report” which compares key financial indicators for the state’s health plans. It shows that in 2009 [before any of the changes occur] the four dominant not-for-profit health plans in Massachusetts all have less than a 1% profit margin and a medical expense ratio of 90% or higher. Not much room there to finance anything else.

You can read the rest of Bruce Bullen’s comments at “Let’s Talk Health Care.”

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6 Responses for “How Will the Senate Bill Impact the Insurance Companies and Their Customers?”

  1. Yes, and as I’ve blogged, the rise in insurers’ stocks won’t last. See Richard A. Epstein’s piece on today’s WSJ op-ed.

  2. Miriam Seander says:

    What was the Harvard Pilgrim’s CEO compensation last year? Not for profit does not represent much other than the ablity to hide outrageous compensation packages and huge administrative cost. The outrage expressed in his op ed is laughable.

  3. archon41 says:

    What part of “medical expense ratio of 90%” do you not understand?
    The claim that health care costs can be drastically reduced by eliminating insurer profits is the reddest of herrings, born of a crazed detestation of the “market economy” in general. 55% of all employees covered under group health policies enjoy that benefit under employer funded plans. Where are your obscene profits and “compensation packages” there? The primary savings from these plans come from evading state “mandates” (in vitro fertilization and such.)
    If the cult followers of Chavez and Obama really believed that most of the health care dollar is going to insurer profits and compensation, they would have conducted public hearings on the matter, instead of relying on propagandistic declarations.

  4. turnip says:

    One reason this projection of ‘rising costs everywhere’ seems undeveloped and hence not yet unbelievable to me is that it has no mention of health at all. What are the financial benefits to providing managed care to millions of Americans who otherwise would not have any preventative care? What is the amount saved by hospitals who no longer have to foot the bill for uninsured patients? How will this change care? How can one quantify the value of health?
    I am a first year medical student who is interested in getting a real understanding of how this will affect my field, not politics. It is interesting to see that premiums haven’t reduced in Massachusetts despite having not-for-profit insurance providers according to this article and this is something I’d like to know more about.
    Hopefully someone on this blog can point me to some clear nonbiased and most importantly all inclusive resources.

  5. Nate says:

    archon41′s comment should be expaned to say if Obama cared at all about carrier profits they would stop passing laws driving employers out of self funding and into fully insured plans which have these high carrier profits. The new Medicare CMS reporting where they fine us $1000 per day if we miss reporting a SSN is a perfect example. I only charge $100-$200 a year how can I pay a $1000 a day fine? I’m forced out of business and my clients are forced to go buy a policy from some evil insurance company with a 80% loss ratio.

  6. .., this is an open blog… i am not against in any insurance company… but it is true that not all are implementing well…

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