Ready or not, health care reform is coming and will change the way we all pay for medical care. Lets go over what we do know about how it will affect you. In general, if you are in your 50s or 60s, your cost for healthcare will tend to go down. If you are in your 20s or 30s, it will tend to go up and this is because the law compresses the amount that insurance companies can charge the youngest and oldest customers. If you smoke, you will feel it because insurance companies have been given the clearance to charge as much as 50% more for smokers. They dont have to, but they can. Womens rates will tend to go down and men’s rates will tend to go up because gender will no longer be considered.
People with medical issues will save. If the condition is serious, there will be no need to go to the Texas risk pool for coverage. There wont even be medical questions on health insurance applications. Everyone will be guaranteed coverage. Of course, the government hasnt answered the most basic question. If coverage is guaranteed, why wouldnt I just wait until Im sick to apply? All company insurance plans and even Medicare has an open enrollment period that stops that from happening.
Of course, on January 1, 2014, we all must have coverage or pay a penalty. But the penalty is only $95 or 1% of employee income in the first year. Is that enough to push people into applying? The government needs a lot of healthy people to pay in to the system to cover those who get sick. Whatever the final rules are, people will calculate what they think is the best deal for them and if there are loopholes, they will be quickly found and exploited.
All of the insurance companies must comply with the new rules mandating that 80 or 85% of their revenue be returned to the customers in claims. That 15 or 20% of revenue must include profit, administration costs as well as fraud monitoring. Currently, insurance companies do a great job monitoring healthcare abuse. Certainly much better than the government who is responsible for tens of billions of dollars in Medicare fraud, the biggest single expense in healthcare.
Regardless of the coming details, January of next year will inject turmoil into the medical system. Will the Affordable Care Act be an oxymoron? Will we have enough physicians to handle the influx of new patients? Stay tuned. This will be interesting.
Next time, how health care reform affects businesses.
Guest Blogger, John Huncharek with Academy Financial Group, john@1AFG.com