5 Ways Health Care Reform Will Affect Your Wealth
The world of health care as we knew it no longer exists. It hasn’t existed for several years and the recently passed “health care reform” law, known as the Patient Protection and Affordable Care Act (PPCA), sounded its death knells.
It used to be that I can pay a minimal monthly premium for my health care insurance with an HMO like Cigna or Kaiser. If I had a health problem, I simply showed up and pay a $10 copay and everything else is taken care of. Brand name drugs? No problem – $10.
When I was healthy, my premiums went to cover someone else’s medical bills. When I was sick and needed surgery, lots of other members in the network covered for my cost through their insurance premiums. My premiums were reasonable and affordable. Now my premiums gets increased every 6 months since the PPCA act was passed. For my husband and I, our health insurance premium went from $485/month to $980 and the last round was $1600 as of December 2011. Yes, that’s right, $1600 for two people on group insurance. That’s equivalent to the mortgage on a large house for some areas of the country.
Building wealth and financial security for your future now requires the need to understand your health care coverage. A small mistake during enrollment can increase your future health care costs by thousands of dollars.
Despite what the politicians may say, the passage of the Health Care Reform law (Affordable Health Care Act) last year has brought consequences that will mean higher health care costs for many. Frankly, our politicians probably have no clue what they did. I doubt that a single politician read the full 60,000 pages on that law. (That’s the real count of the final law after all the additions were put in after the passage of the 2,000+ pages law.) Nancy Pelosi said it best:
But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.
So far, group health care cost has gone up almost 14% for some employers. Personal health care premium have also increased at the same rapid pace. Understand that the Health Care Reform law neither reformed health care, nor lower costs. It simply changed the requirements for health care insurance and reimbursements for Medicare.
Of course there were good points to this law; such as removing limits from health care lifetime coverage, raising dependent’s age, allowing coverage of dependents up to age 26 and removal of declines due to pre-existing conditions.
Unfortunately on the down side, a number of new rules and penalties have subsequently been put into place that have sent the entire industry into turmoil. Furthermore, no one can guess what rules may be put in place in the future.
Going forward, consumers will need to follow the complexities of health care insurance closely–as it will be large part of your health care expenses. Here are several trends and developments we foresee:
1. Increased insurance premium will be the most obvious and immediate cost to your pocketbook . Insurance companies will have higher costs of operation because of rearranging their systems, additional paperwork, increased legal fees to fight new regulations, and many other new expenses. I fully expect these to be passed to the consumers.
2. Reduced competition leading to reduced options. Large companies don’t do business if it’s not profitable. Doctors don’t accept patients that can’t pay. That is a typical business decision. Our choices for health care insurance will swiftly be reduced to a couple of companies per state as the competition walks away. This will allow the remaining companies to control the pricing because they now own the market.
Indiana is a good example of this situation. So far, five companies have abandoned the state and shut down their health care insurance programs. Aetna, the country’s third largest insurance company, just announced they will shut down and cancel all their medical plans. Why? Aetna only has 700 customers and the costs of doing business with those customers is too high after the new law went into effect. Four other companies – Pekin, American Community Mutual, Cigna, and Guardian Life – already left the state and cited the same issue.
The new Health Care Reform Law requires that all the insurance companies spend 80% of the premiums collected on medical care. This is known as the 80% rule or medical loss ratio. The intent by our politicians was good but they didn’t think of the consequences. A smaller competitor or someone entering a market will have the same fixed costs as the companies who have a monopoly. However, they don’t have the customers or revenue yet to absorb those costs. As a result, the percentage on expenses types will be different.
The interesting development will be the quality and quantity of doctors who will be willing to participate in the new health insurance exchanges that are supposed to be up and running in 2014. Right now, even with good insurance programs, the best specialists get to pick and choose their patients. Just because you have health insurance does not mean that you will receive the medical care you want.
3. Cheap HMO (Health Maintenance Organizations) or PPO (Preferred Providers Organizations) programs will disappear. Health care has changed and the full coverage that we were used is now gone. Instead, consumers will have to choose from a menu of benefits. It is critical for consumers to understand what each benefit will cost and what actually will be covered. If you want the simplicity of low copay, it will cost you dearly.
I get weekly notices about closures of existing health care programs both on the group and individual side. We constantly have to field calls from panicky clients that their long time programs are being terminated.
4. Free services now cost money. It doesn’t make sense, but the free preventive care that I used to get as part of my insurance coverage now costs money–depending on how my doctor codes the service and bills me. The culprit behind this change is the new health care reform law. It specifies exactly how and what insurance companies can cover as preventive care for free, so often what was once provided for free the government now mandates to be billed.
Example 1: I have an annual physical every year that was fully covered except for the $25/copay for the visit. It comes with a full battery of tests and immunization shots that I requested in case I traveled overseas. None of this was extra costs. In addition, I got a rebate of $300 from different insurance companies for doing these tests and preventive care.
Now, my physical seem to cover only the exam by the doctor. Any tests other than the required (female related) are charged to me and has to be paid in full until my deductible is met. My immunization shots are considered to be extras and are billed.
This means that I went from paying $25/year to possibly several thousands dollars for the same exact service.
Who knows how mammograms will be billed in the future since the U.S. Preventive Services Task Force (USPSTF) announced in November 2009 that they recommended against annual breast cancer screening for women ages 40 to 49 and reduced screening for women over 50. The new law has an amendment authorizing insurance companies to use the 2002 guidelines for now. Tell the 25% of my friends under 50 who were diagnosed with breast cancer that mammograms are not preventive care. Two would have been dead by the time screening is allowed.
Example 2. One of our clients sent her husband in for his annual physical. Instead of his old copay, he was billed for the full visit along with every tests that was ordered. They had to pay several hundred dollars out of pocket. Why? This happened because her husband told the doctor that he didn’t feel well and had shortness of breath. Under the new criteria, his physical exam (preventive care) has now turned into a consultative visit and has to be charged in full.
5. The savvy consumer can reduce health care costs and protect their wealth with a tax free reserve. Despite all the negative changes, smart planning can keep your costs stable if you use all the tools that are available. It means diving into all the nitty gritty of health care coverage. There are multiple options out there to explore such as HSA (Health Savings Account) and alternative insurance products.
Some of these choices may not be right for you. Do a personalized analysis of exactly what you have and need before you make any decisions. Above all, don’t make any choices solely on the monthly premium amount. Here are two strategies to explore:
Seniors and boomers can receive a reduction in drug costs for the “donut hole” in Medicare due to perscription discounts and a push into generic drugs.
Middle class families can now qualify for Medicaid – the government paid health care program.
As with everything else we buy, the old saying of “buyer beware” or “caveat emptor” is even more true today. The best way to save money is to do the right research before you buy.
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