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Policy Holders Could
Pay MORE with Obama Plan |
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If President Barack
Obama gets what he wants
in his health care plan
_ covering all Americans
and barring insurers
from denying coverage _
some analysts say
individuals could wind
up paying higher
premiums.
The Obama plan would
impose new costs on
insurance companies,
which would probably
then raise the prices
customers pay for
coverage. Employers also
would likely pass on
some of their higher
costs to employees.
An individual in a
typical plan might have
to pay up to $780 more
for the same coverage in
the first year of
Obama's plan, estimates
Erik Gordon, a health
care analyst and
assistant professor at
the University of
Michigan's Ross School
of Business.
Gordon said employees
now typically pay 20 to
40 percent of the
premium for a typical
health care package
costing about $13,000 a
year for a family of
four, with employers
picking up the rest.
Obama's plan would raise
insurers' costs 10 to 15
percent if reform
doesn't provide other
savings, Gordon
estimated. He thinks
employers would stick
employees with perhaps
40 percent of the higher
premium, or $520 to $780
more _ though they might
also receive better
coverage because of
mandatory preventive
care and screenings.
The president told
Congress most of health
care reform can be paid
for by eliminating waste
and abuse in the
existing system. Better
screenings that prevent
chronic diseases later
would also save money,
the administration has
argued.
"The president's plan
will introduce choice
and competition into the
health insurance market.
The increased
availability of
affordable health
insurance options will
lower health costs for
all Americans," said
Linda Douglass,
spokeswoman for the
White House Office of
Health Reform.
In his speech to
Congress on Wednesday
night, Obama said he
wants to bar insurers
from denying coverage to
anyone because of a
pre-existing health
problem, canceling
policies for sick people
or refusing to cover
preventive care.
He also suggested limits
on Americans'
co-payments and
deductibles. "We will
place a limit on how
much you can be charged
for out-of-pocket
expenses, because in the
United States of
America, no one should
go broke because they
get sick," the president
said.
Obama would also charge
insurers a fee for their
most expensive policies
as a way of encouraging
insurers to keep costs
low and keep their rates
low.
In addition, Sen. Max
Baucus, D-Mont.,
chairman of the Senate
Finance Committee, has
proposed a new fee on
insurers that would
subsidize coverage for
uninsured Americans. The
fee would generate about
$6 billion a year.
Covering tens of
millions more Americans
would heap hundreds of
billions of dollars in
costs on managed care
companies.
Yet insurers stand to
benefit in other ways.
Consultants estimate
Obama's priorities would
shower the industry with
at least $1 trillion in
new revenue from
premiums over the next
decade.
Industry representatives
counter that, even if
insurers take in more
money than they pay out,
profit margins are so
thin that additional
taxes and fees would
wind up being passed on
to policyholders.
"There is no room for
these taxes," said H.
Edward Hanway, CEO of
Cigna. "What you're
ultimately going to see
if those taxes hold is
everybody's costs going
up, not just the new
people being covered.
The concern I have is
these taxes don't do
anything but add to the
cost of people already
insured."
Others said Obama's plan
might not raise costs as
much as expected if
everyone is required to
have insurance and
receive preventive care
like regular checkups or
mammograms, which can
save money in the long
run.
Lawmakers have yet to
settle on any single
health care plan. But
several ideas being
discussed could be a
boon to private health
insurers, especially if
the eventual reform does
not include a public
plan to compete with
them. Obama reiterated
his support for a public
plan but did not insist
on it, and industry
analysts think the idea
will disappear
eventually. That helps
explain why analysts
don't think the
insurance industry faces
any serious threat from
the Obama plan.
The stocks of several
health insurers
performed better than
the broader market
Thursday. Shares of
Cigna rose more than 5
percent, and Humana
Inc., WellPoint Inc. and
Aetna Inc. all climbed
at least 2 percent.
Investors are "coming
more and more to the
conclusion that it's
really not going to
hurt," said BMO Capital
Markets analyst Dave
Shove.
Shove noted that many
insurers already operate
profitably in states
that have restrictions
similar to those being
discussed in reform
proposals. These include
limits on profitability
and laws that guarantee
coverage for individual
insurance.
Health care reform
without a public option
"would be fantastic" for
insurers, said Robert
Laszewski, president of
Health Policy and
Strategy Associates, a
Virginia-based health
care consulting firm.
"They're going to get
millions of new
customers and more than
a trillion in new
premiums over a 10-year
period," said Laszewski,
a former industry
executive. "There's a
reason they aren't
running any negative
ads."
The plan also would send
new business to
providers. Another
analyst, David Bachman
of Longbow Research in
Independence, Ohio,
expects spending on
doctor visits would jump
$8.5 billion a year
under Obama's proposal.
He also expects to see
an initial increase in
spending on supplies
used during patient
visits, amounting to
roughly $2 billion per
year, and billions of
dollars more for
diagnostic testing and
prescription drugs.
Overall, Bachman said
his
"back-of-the-envelope
calculation" indicates a
15 percent increase in
spending at hospitals,
17 percent more for
doctor visits and 10 to
12 percent more for
patient supplies.
Insurers will then pass
those increases on to
customers, he said.
"They're going to raise
premiums on employers,
who are going to raise
costs for employees,"
Bachman said. "Then the
fight becomes over how
to best control costs."Learn how easy and convenient shopping for health insurance can be. Get your
free health insurance online quotes today! |
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