As the nation begins to understand what the massive health care reform legislation means for Americans, we are starting to see how businesses and insurance companies are reacting to these changes. Unfortunately, these reactions don’t bode well for the future of employer-sponsored health insurance and the mantra of “choice and competition” that was used so often in the debate leading up to the historic vote on health care reform.
A story was first reported in The Wall Street Journal about McDonald’s concern about its ability to continue to offer some form of insurance to its employees. At issue is the very limited insurance plan (mini-med plans) that McDonald’s currently offers to its employees. These low-cost plans offer McDonald's employees very limited coverage in order to keep prices down. However, this type of low option plan violates the new legislation’s insurance reform position of no life time maximums on insurance policies. In this case, federal health officials granted a waiver to the insurance company that provides these policies for McDonald’s employees. This move raises the question: why should one employer be exempted from some of the mandated benefits under the new health reform law? If insurance reform was so important in the first place, then why start off by providing waivers for exemptions?
In my opinion, the reason for these waivers is very simple. The administration knows that if it doesn’t provide the waivers, then companies like McDonald’s will have no choice but to stop providing any health insurance to its employees because the cost to comply with the mandated benefits in the new legislation is simply too great for a company with McDonald’s business model to absorb. Since there is no way that the administration wants 385,000 McDonald’s employees to lose their health insurance coverage right before the midterm elections, the waivers are necessary to temporarily cover up this major flaw. The bigger question now is: what happens when the elections are over? Eventually these waivers are going to go away, and when this happens, what are companies like McDonald’s going to do then? This is only the beginning of a major problem looming ahead.
The next related story comes from The Boston Globe. On September 28th, The Boston Globe reported that Harvard Pilgrim Health Care had notified its customers that it will be dropping its Medicare Advantage program at the end of this year. The move means that 22,000 senior citizens covered by the Harvard Pilgrim plan will have to find new supplemental coverage. When asked about the reasoning for the move, Lynn Bowman, Vice President of Customer Service at Harvard Pilgrim, said this: “We became concerned by the long-term viability of Medicare Advantage programs in general.”
Two days later, The New York Times reported that The Principal Financial Group announced that it planned to stop selling health insurance. The company currently provides coverage for about 840,000 people. The company’s decision is directly related to the new health care reform legislation as executives at The Principle Financial Group surveyed the future landscape and determined that the best course of action was to leave the health insurance business all together. That’s right – leave the health insurance industry altogether.
So are these isolated instances or are we likely to see this trend continue with other companies and in other markets? My guess is that this is only the tip of the proverbial iceberg. More employers are going to be forced to decide between offering the new, more expensive mandated benefit plans called for under health care reform or dropping insurance all together. In addition, more insurance companies are going to be facing the question of which products they will continue to offer and in what markets. In the most extreme cases, like The Principle Financial Group, insurance companies are going to be forced to decide if they even want to remain in the health insurance business at all. Remember all the talk about health care reform increasing choice and competition? Yeah, not so much.
So are these isolated instances or are we likely to see this trend continue with other companies and in other markets? My guess is that this is only the tip of the proverbial iceberg. More employers are going to be forced to decide between offering the new, more expensive mandated benefit plans called for under health care reform or dropping insurance all together. In addition, more insurance companies are going to be facing the question of which products they will continue to offer and in what markets. In the most extreme cases, like The Principle Financial Group, insurance companies are going to be forced to decide if they even want to remain in the health insurance business at all. Remember all the talk about health care reform increasing choice and competition? Yeah, not so much.
Articles to reference:
1. Wall Street Journal: McDonald's May Drop Health Plan
2. New York Times: Insurer Cuts Health Plans as New Law Takes Hold
3. Boston Globe: Harvard Pilgrim cancels Medicare Advantage Plan
4. New York Times: White House allows big firms to dodge health reforms
No comments:
Post a Comment