Health Care Reform: The Future Is Now

The final passage of the Affordable Care Act of 2010 was the ultimate anti-climax. The cornerstone of the law, its exchanges, will not go live until 2014. In addition, many of the elements of legislation promised for this year, are subject to the rules written by the Secretary of Health and Human Services. The insurance industry will likely press those rules to test for weakness, and Republicans are trying to mount a campaign for repeal. No friends, passage was just the beginning of the process.

There are three issues which define the effectiveness of the law now:

  1. Will the Obama Administration be able to enforce the promises for early action (before 2014) on items only loosely mandated by the Law?
  2. Will Republicans gain enough seats in the midterm elections to push through major modifications or repeal; will the President veto such changes?
  3. Will the Obama Administration and state governments be able to contain costs against what will be an onslaught of rate increase filings in the coming months?

These three issues trump the long range question of how much the law will do to bend the cost curve on health care. The Affordable Care Act will cover the bulk of the nation, a fact which will steadily reduce the burdens on uninsured Americans, especially on state and local hospitals and urgent care clinics. But two long term issue will define the law as a success or failure:

  1. Will the exchanges, managed by states, be effective in bringing true competition to the individual and small business insurance markets?
  2. Will the tool-chest of best practices, partially funded by grants, be effective in spurring a new private delivery system based on salaried doctors (versus bill for everything) and non-profit umbrella systems?

The Administration issued rules in June enforcing the changes mandated by law this year. A ban on preexisting conditions in children, a prohibition of annual spending caps, a prohibition against rescission, and the creation of temporary high-risk pools to cover adults with preexisting conditions have all been accounted for in the rules. Early questions by the insurance industry regarding the scope of some of those rules were largely squelched by a fast-responding Obama Administration and public opinion. When it comes to the individual items of the law, Bill Clinton was correct when he said the popularity would grow after passage.

The insurance industry will hedge its bets on the future, unwilling to tempt public anger and the legislative action such anger could precipitate. They are already sponsering studies decrying increased cost of operations, but have held their fire in direct confrontations with the Obama Administration and state insurance commissions. Wall Street is another matter; they have shown the ability to run their collective mouth well past the point of reason, and this issue is no different. While it doesn’t appear, from earnings estimates or dividend levels, that insurers are worried about profitability, Wall Street pundits continue to blather on about the “consequences” of the law.

The insurance industry is sure to be a volatile place for the next few years, and most estimates show 30-40 million individuals (out of 170 million employer-covered) being forced into plan changes. I won’t minimize the pain of change, but I will point out that switching insurance providers, changing doctors, and being forced into different drugs do to formulary changes have been a fact of American life for some time now. One of the goals of the law is to give those choices over to the consumer. Like all of the other benefits of the Affordable Care Act, the final answer to that question will not be heard for some time into the future.

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