Industry players in the US have reacted pragmatically to the ACA, according to a poll undertaken by Life Insurance International. President Obama has said that ACA means that from 2014, the 30 million Americans who do not yet have health insurance, will have access to “affordable” private health insurance plans.
The legislation was signed into law in 2010, but opponents of the reform had argued that the law’s individual responsibility provision exceeds Congress’ power to regulate interstate commerce because it penalizes “inactivity.”
Republican presidential contender Mitt Romney has even vowed to act to repeal ACA if elected US president.
Leslie Levinson, chair of the Healthcare Practice Group at law firm Edwards Wild-man Palmer, has been following developments over the last two years.
He says: “Many had already accepted that change is coming, and whether the court threw out the law, in whole or in part, people were already moving in a direction to do things differently, recognising [as in the UK] that the way of delivering healthcare on a traditional basis has got to change.”
This view is echoed by Joseph Marinucci, a director at Standard and Poor’s, who says: “Health insurers have for the best part been focused on implementation and have generally been constructive.
“Obviously they’ve voiced concern, but over the past couple of years the bill’s been law, and, for the most part, health insurers are in a better position to clarify strategy and focus on near term operational priorities.”
Robert Zirkelbach, press secretary for American Health Insurance Plans (AHIP), the national trade association representing the health insurance industry in the US, said the ACA expands coverage to millions of Americans, and “that’s a goal that our industry has long supported”.
However, he warned that the legislation also contains major provisions that will increase the cost of healthcare coverage for consumers and employers. “That’s the opposite of what healthcare reform is supposed to accomplish,” said Zirkelbach.
One of the challenges involved with ACA is that it requires that each insurer must meet a medical loss ratio (MLR) to ensure affordable premiums and consumer value.
Large group health insurance issuers must spend at least 85% of premiums on direct medical care and quality activities.
Meanwhile, small and individual group issuers must spend at least 80%of premiums on direct medical care and quality activities. If an insurer exceeds the target ratio, it must provide the consumer with a rebate for the amount in excess of the ratio percentage.
Eric Fader, counsel at Edwards Wildman Palmer, says the MLR requirements are “probably the least popular aspect of the ACA” for insurance companies.
He points out that while some insurance companies were already complying with the requirements, smaller insurers, or those offering products in niche markets and insurers in less populated areas, are likely to have “difficulty spending less money on overheads”.
In addition, says Zirkelbach, the law will limit the variation between premiums based on age: “Right now a 60-year-old is paying five times or more what a 20-year-old is paying for coverage. The law’s limiting that to three to one, meaning that younger people are going to see their costs go up quite significantly. And that increases the likelihood that they’ll simply pay the penalty and wait to buy insurance until they need it”.
Matt Wiggin, head of public affairs at health insurer Aetna, says its primary concern with the MLR is that it does nothing to control rising medical costs.
These, he says are the primary drivers of the premiums people pay for their insurance. In addition, “the MLR also limits insurers’ ability to invest in programmes and services that could help improve health outcomes, and the cost of health care,” says Wiggin.
Zirkelbach says a major concern is that the legislation focuses on expanding coverage, but does not really focus on those underlying medical cost drivers.
Another issue adds Zirkelbach is that the costs of medical care and medical technology are rising at “an unsustainable rate”.
This situation means a large chunk of federal and state budgets are consumed, and burdens employers.
Zirkelbach says: “So as the debate here in Washington progressed, it shifted away from comprehensive reform …and shifted solely to insurance reform and expanding coverage.”