It is the primary objective of any government to protect the welfare of its people; the most important of them all being health. A government does this by setting up mechanisms that will ensure everyone in the society has access to health care and most importantly affordable healthcare. Insurance comes in handy in this mechanism by collecting, keeping in custody and regulating a pool of resources so that anyone in the society partnering in the pool can always get medical care using those resources.
Recently the U.S government implemented a new healthcare bill for the welfare and benefit of all the U.S. citizens. However, the impact of the bill to both the insurance market and the people has been questioned. This paper discusses the bill in terms of how it came about, how it works, its constitutionality as well how good or bad the idea of the is.
Health Care Bill
Journey of Healthcare Reform Bill
The healthcare reforms and the bill have a long history dating back in the 19th century. It is believed that the reforms began way back in 1854 with President Franklin Pierce and his reforms were taken over by other presidents such as Roosevelt and Truman with Lyndon Johnson having the bill cover mostly the aged. Bill Clinton made a significant change by introducing the health insurance portability and accountability act (HIPAA).
Bush continued the fight with his proposal of merging the consumers’ bill of rights with health care which was not well taken by the medical and insurance fraternity. All the previously enacted bills had major inefficiencies that called for reforms. A report by council of economic advisers argued that “some of the strongest evidence of such inefficiencies comes from the tremendous variation across states in Medicare spending per enrollee, with no evidence of corresponding variations in either medical needs or outcomes” (CEA 3).
The same report also claimed that by reducing the inefficiencies such as the payment systems that hardly favor medical outcome, expensive maintenance costs and lack of focus on disease prevention resources used on healthcare could dramatically be reduced. This gave birth to the healthcare bill (CEA 3).
How the bill works
The main concept of the bill is to get everyone onboard irrespective of the income status, ensure health insurance firms adhere to healthcare ethics while at the same time making sure that costs are as low as possible to have a positive impact on economic growth. According to CBS news report the bill is expected to spread its net to cover the approximate 30 million citizens currently uncovered. The bill has a health insurance exchange program whereby the uncovered and self-employed will be expected to buy insurance cover from the state. The state will offer subsidies to low income earners. By the year 2014 the program is expected to implement unique exchanges for small business enterprises. However, resources for the implementation of the exchanges will be rolled out to the states by the year 2015 (Jill and Nolen 1).
Much the resources will primarily be obtained from the taxpayers from their pay. Families earning more than $250,000 will be expected to pay at least 3.8% from their investment returns. Insurance firms will be expected to give exercise tax amounting to 40% from year 2018 on insurance plans above $27,500 for families and approximately half the amount for individuals. To ensure everyone is on board an annual fine of $695 will face those who won’t be on the plan though there will be some considerations for low income earners.
Employers will be mandated to provide for the insurance cover failure of which will make them face penalties worth $2000 for each employee, nevertheless the plan provides for attractive 35% tax credits of all insurance premiums to ease the employer insurance coverage burden. The healthcare plan, however, does not cover the illegal immigrants even if they would be willing to pay from their own resources (Whitehouse 1).
Medicare and fresh private policies will be expected to offer zero cost preventive care with no co-payments or deductibles for such services. In addition, premature retirees will be catered for by the temporary re-insurance plan aimed at subsidizing the high cost old age premiums both to the employer and the retirees (Whitehouse 1).
Half a year after the plan starts working the insurance firms will be expected to cover all the children irrespective of their preexisting medical conditions. It is also expected that by the year 2014 insurance firms will be expected to cover all people irrespective of their pre-existing medical condition. A point worth noting is that the bill does not cater for abortion cover and as such different pools were set: the taxpayer pool which doest cover for abortion and private premiums account for those wishing for abortion cover (CEA 1).
The bill is also believed to close in on “donut hole” situation ten years from now by providing an allowance of $250 rebate to grownups who may happen to be on the donut situation by then, however for a start, 50% discount will be allowed for people using branded drugs. It is also projected that the plan will provide up to half a trillion dollars for medical care subsidies. The bill was good news for anyone below 26 years of age as they will be allowed to ride on their parent’s insurance covers. Medical aid is expected to spread out to cater for the poverty level population which may hit $30,000 for an average family. The states will also be expected to spread out medical aid to cover childless grownups by the beginning of 2014 (The White House 1).
Constitutionality of the bill
There has been a mixed reaction about the constitutionality of the healthcare bill. While some agreed to the bill and its constitutionality and actually voted for it, others questioned its constitutionality. It is claimed that “Indeed, only seven minutes after the health reform bill was signed into law on March 23, a collection of 13 state attorneys general filed suit in Pensacola, FL, challenging PPACA’s constitutionality and demanding that their states be exempt from certain of its provisions” (Arts and Erwin 1).
The same report claimed that “the lawsuit contends that PPACA violates Articles I and IV of the Constitution and the 10th Amendment to the Constitution” (Arts and Erwin 1). Most of the constitutional arguments about the bill are based on “Commerce Clause, congressional taxing and spending power, federalism, and the deprivation of individual rights” (Arts and Erwin 1).
It comes without saying that any health bill, bad or good, will definitely have a positive or negative impact on insurance market. The healthcare bill will arguably have both positive and negative impact on the insurance industry in America. It can be argued that since the bill provides for both government and private healthcare insurance plans and at the same time offers the states option to choose the one they deem appropriate this might be interpreted as an unwarranted competitive intimidation. Competing with a powerful and resourceful institution such as the government may not be the best for the insurance industry.
It is believed that insurance companies will suffer from hefty taxes. A report by Reuters claim that “Insurers such as WellPoint Inc, Humana Inc., Cigna Corp. and Aetna Inc. face a $6.7 billion annual industry tax, to be allotted according to their market share” (Reuters 1). It is also believed that by the next three years insurer will have given out $25 billion as cost towards reinsurance plan aimed at protecting them against losses.
The resource pool for insurers may not be adequate since the penalties for failure to enter the program is believed to be low and as such some might consider paying the penalties instead. In addition there are fears that “Reimbursement rates for Medicare Advantage plans, which can offer more benefits than traditional fee-for-service Medicare coverage will lead to higher costs” (Reuters 1). This is likely to cost the insurer more in the long run.
The plan allows people less than 26 years of age to be covered under the umbrella of their parent’s insurance covers. Then, it can be argued that if the population of this group increases in relation to the available funds then the insurer might record losses by covering a population that does not contribute to the pool. In addition to this insurers will be forced to cover everyone irrespective of their medical condition. It can then be argued that if the number of premium subscribers is higher among this group than other groups then the program might prove to be difficult to sustain.
The fact that everyone will be forced by to pay for the insurance premiums might mean more subscribers and more resources for the insurer hence more profits in the long run. The plan allows for subsidies for low income end and this might be an advantage for the insurer since the burden of covering even those who cannot afford the premiums will have been lifted.
The bill allows for both the private and the government insurance plans which can be seen as a chance for competitiveness. This will enable the insurance to offer competitive services taking into consideration that they have the upper hand in insurance business experience and technical expertise.
Good or a Bad Idea
The advantages likely to be accrued
It might be quite early to tell whether the healthcare bill will be a good or a bad deal for all the stakeholders. For any deal there are likely winners and losers too. However, looking at the present situations, it can generally be argued that it might turn out to be a fair deal for the American citizens. The deal means full medical insurance cover for everyone albeit being somewhat forced through the penalties. It also means medical cover to all people irrespective of pre-existing medical conditions and age, an added advantage for people below 26 years is that they will be covered by their parent’s premiums.
To the insurance companies it means more subscribers hence more economy of scale which may translate to more profits. Subsidies to the low income earners mean that the insurance companies will not have to carry this burden. At the same time if the plan works as to the government’s expectation more Americans will have more trust and confidence in the government for providing good healthcare plan for them hence giving them goodwill. The healthcare plan is still very young and at this stage we can only hope the bill will work for good for all the stakeholders. Personally I would give the bill a benefit of doubt and wait to see its practicability with time and possibly change it when the need arises.
Healthcare plan is arguably one of the measures of any government’s success in providing healthcare to its citizens. The Obama healthcare has a long history: The history dates back in the 19th century. It is believed that the reforms began way back in 1854 with President Franklin and the latest reforms were aimed at ensuring affordable healthcare to all citizens irrespective of age, medical condition or level of income in an efficient and effective way. Though the bill has already been passed, its constitutionality has been questioned and cases have already been filed in court on the basis that the bill contradicts some issues in clauses dealing with commerce, taxation, federal powers as well as human rights.
The main concept behind the working of the bill is based in participation for all, and insurance for all. The fact that everyone will be forced by to pay for the insurance premiums might mean more subscribers and more resources for the insurer hence more profits in the long run. It also means medical cover to all people irrespective of pre-existing medical conditions and age thus every citizen will be assured of a medical coverage. The bill may be given a benefit of doubt for now as we await the implementation and possibly change it as we notice any shortcomings with time.
Arts, Kevin and Erwin, Bill. Legal Challenges to Health Reform. All Health Publications, 2010. Web.
CEA. The Economic Case for Health Care Reform. Council of Economic Advisors, 2009. Web.
Jill, Jackson and Nolen, John. Health Care Reform Bill Summary: A Look at What’s in the Bill. CBS News, 2010. Web.
The White House. What Happens Next. Whitehouse, 2010. Web.