The future of Barrack Obama’s healthcare bill is relatively ambiguous. Its main provisions will activate until 2014. Until then, the Supreme Court may hastily strike it down or Congress may enact serious legislative restraints. However, even though the law has yet to take effect, implicit repercussions are already occurring, especially in the insurance field. It is the latest deal to extend insurers’ grip into new areas of healthcare.
Normally speaking, insurers “protect margins by micromanaging claims and hiking premiums”, leading to perverse incentives for high quantity, low quality procedures. Thus, from 2014, the law will require everyone to buy health insurance and offer subsidiaries to those who cannot afford it. As more people purchase insurance, “firms’ revenue will more than double to $1.2 trillion by 2019”. Yet, profits will be squeezed thanks to a new tax, a minimum standard for benefits and new scrutiny of increases in premiums. With this in mind, insurers are keen to diversify. Like Aetna and other major healthcare insurance companies, many are hedging against a volatile private market by turning to the public one, like Medicare Advantage.
Moreover, insurers are spreading to new businesses. This past year, Aetna bought an information technology requirement. Humana recently purchased a chain of clinics. For the UnitedHealth Group , two non-insurance subsidiaries already “account for 20% of its $94 billion annual revenue”. In all these companies, the concept of marginal analysis is being applied because the costs and benefits are weighed for each additional acquired supplemental business. That said, historically, insurers have derisively fought with hospitals over payments. But now, with more insurers interlinking with small, non-insurance companies and an increased demand for pay-for-performance contracts, the interests of insurer’s may finally be aligning with those of its former enemies.
(Information taken from “The Doctor Octopus”, The Economist October 29th 2011)
I agree that insurance companies will expand into other areas as if my profit margins were squeezed, I would diversify into other fields as well.
ReplyDeleteWhile I agree healthcare reform is far from perfect, (very, very far from perfect) I do think people often forget or don't realize the importance of making rescission, lifetime caps and denying insurance based on preexisting conditions illegal. These changes are all extraordinarily necessary and beneficial. I'm not saying people shouldn't be critical of the bill as it passed, but they should realize that there is some serious good that is to came out of it.
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