Health reform presents solutions, challenges Business Insurance
The federal health care reform law creates a new set of challenges for employers even as it attempts to solve problems. Reducing the number of uninsured is positive. Doing so provides care to those who otherwise could not get care and will cut down on the amount of uncompensated health care, one driver of pass-along costs.
But the health care law does not address other, more significant cost drivers in the health care system. In fact, some provisions seem certain to increase costs, at least initially. Take the tax on pharmaceutical companies, which will be $2 billion in 2011 and go up from there. The law doesn't stop pharma companies from passing costs on to consumers, and only a fool would believe that won't happen. Ditto for the levy on health insurers beginning in 2014.
The law's health insurance market reforms make it hard to envision how private insurers can earn profits without radically changing their business models. The removal of annual and lifetime limits on benefits, coupled with minimum medical loss ratios and review of rate increases, will test insurers' underwriting. Many health insurers also are worried about adverse selection, which they say will force them to charge higher premiums.
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