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Medical Insurance Companies Find Healthcare Reform Loopholes

Medical Insurance Companies Find Healthcare Reform Loopholes

The Obama administration made it a point to require medical insurance companies to

provide health care coverage to children without imposing any limitations or exclusions. This is a notable feature of the amended health care laws.Medical insurance companies complied with the new legislation, and the government was satisfied. About four months into the implementation of the new rules, however, insurers found a loophole.

Without any form of limitation or restriction, parents can choose to buy insurance only when their children become ill, and insurance companies would then have to pay up immediately. Conceding to insurers' point, the government updated the law to allow insurance companies to impose a specific enrollment periods for minors (anyone under 19 years of age) in an individual or family health insurance policy. This means that, parents can buy insurance for their children only during specific dates in a year.This issue shows that the new legislation still has some kinks that need to be worked out as its implementation proceeds over the next few years.

Currently, only Massachusetts requires its residents to have health insurance. Insurance companies are still allowed to impose higher premiums for people who are considered a health risk.Under the new laws, by 2014, having medical insurance will be required of everybody. The Obama administration has promised to subsidize this undertaking, as they acknowledge that not everybody can afford to pay for coverage on their own. Shopping for insurance will be made easier by having a centralized marketplace in each state.But until then, only people prone to illness or who have an existing medical condition are sure to buy health care insurance. Most people get coverage only if subsidized by employers or if they feel they absolutely have to (which is not often the case). The government is saying that the new health care laws have many advantages for the consumer, but in its present form, there are still some provisions that run the risk of driving health care costs higher.Without subsidies, buying health insurance is still a costly proposition for the average consumer, never mind those who are prone to illness or who have an existing medical condition.

The new legislation seeks to reverse that situation. Its implementation, however, will not be easy.New health care laws give consumers the right to additional benefits such as free preventive services, the inclusion of young adults in their parents' coverage and the ability to have a say on health plan decisions by their employer or insurer. However, all these additional benefits come with a price, and consumers are seeing the rapid increase in the cost of premiums over the next few years as both employers and insurers try to struggle with their own expenses as they comply with the new laws.On the other hand, insurance companies cannot raise the price of their products too much. The new legislation has sanctions against insurers that impose any 'unreasonable premium increase'. They run the risk of being prevented from participating in the central insurance marketplace and having low sales.The new law is also eating into insurance companies' profit margin by requiring at least an 80% medical loss ratio. This means that their profit cannot exceed 20% of the value of the premiums that it charges it customers. This requirement may be difficult to fulfill on the part of the insurers, especially if they are dealing with certain individuals or small businesses.Insurers' concern over this feature has prompted them to ask for exemptions. They pointed out that the medical loss ratio requirement can cause an increase in premium costs, as well as a significant disturbance of the health insurance market and industry as a whole.Medical Insurance Companies Find Healthcare Reform Loopholes


The new laws make it difficult for a provider of so-called bottom-dweller plans to do business. These plans are usually aimed at healthy young individuals, but do not provide adequate protection when policyholders become ill. This is a good thing in the long run, but as these providers pull out of the market, there should be viable alternatives in place. Politicians have vested interest in making the new laws a success. They may find themselves voted out of office if the health care legislation they supported made health care more expensive rather than more affordable. Big name health insurance companies usually take the blame as politicians try to curb criticism pointed at them.Lawmakers believe that health insurance companies like Aetna and UnitedHealthcare stand to make huge profits as health insurance becomes required. Therefore, they can afford to reduce premium charges. For now, the president is regulating the health care insurance industry, a power granted to him by Congress.Massachusetts is an example of the new health care legislation in action. On the whole, the government does not expect the transition to be easy, but its success is dependent on the cooperation of health insurance companies and their willingness to abide with new regulations.

by: Tom Carolan
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Medical Insurance Companies Find Healthcare Reform Loopholes