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Obama Health Care: How It Is Affecting Major Health Insurance Providers

Published 05/23/2010

Although major health care insurance providers initially expressed considerable opposition to president Obama's new health care bill, they are now beginning to understand just how nice it may work out for them in the long run. Short-term legislative changes have created negative slidebacks on insurance company profit margins. This happened partially because of the reductions in payments from the government to Medicare Advantage plans, and also because of other new regulations that:

  • Forbid insurance providers to offer policies with individual lifetime caps;
  • Guarantee coverage for children with preexisting health conditions;
  • Forbid insurance providers to drop all adult policyholders because they become sick while under rescission policies;

Beginning in 2014, insurance providers will no longer be allowed to deny health coverage to those who have preexisting medical conditions. According to insurance trade association, America's Health Insurance Plans, this policy is going to create an explosion in the prices of policy premiums. The reason, they say, is because no universal coverage standards will be created. However, this is thought to be only temporary. According to the Congressional Budget Office, when the insurance providers receive an additional 32,000,000 new policyholders, they're going to make a lot of money. That infusion of revenue should make them able to bring prices back down in time.

Long-term visions for President Obama's new health care plan are based on creating more revenue for insurance providers, as well as more availability and affordability of health insurance coverage for individuals and small businesses all across the country. When insurance companies have to compete for customers, they will remain motivated to regulate and consistently moderate what they charge for premiums. And as the premium rates continue to drop for all Americans, the approximately 23,000,000 uninsured that remain will find themselves beginning to be able to purchase health coverage of their own. This in turn will act to cause decreases in the amount of individuals who would opt to purchase health care insurance only after they are diagnosed with sickness or disease.

Under the new legislation, there are certain drawbacks for major insurance providers. Firstly, the federal government is going to cut out roughly $200,000,000,000 in payments to various Medicare Advantage plans. Companies like Humana will be especially affected. However, everyone understands that as Medicare attempts to pass off newly-incurred risks onto its providers, insurers from the private sector will become available to assist. That will result simply because these private insurers understand the concept of managed care far better than the regulating governmental agencies do.

If major insurance companies that provide health care benefits to millions of Americans and small businesses can stop thinking about short-term profits, they will be able to focus clearly on the long-term benefits that will result from Obama's new Health Care plan. In the meantime, these things take time to evolve. And as we progress nearer to 2014, the changes will become increasingly clear. And hopefully, insurance providers, small businesses and individuals alike will all mutually benefit.

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