The main objective of healthcare reform is to ensure sustainability and fairness. The reforms widen the population that receives insurance coverage, minimize the cost of healthcare, diversify the healthcare, and improve accessibility and quality of healthcare services (Michael Para. 2). Therefore, healthcare reform affects patients, healthcare providers and biomedical researchers, as well as the government at large. However, every physician, unlike the public, understands the negative effects of healthcare reforms (Moffatt 13). The paper considers the response of insurance companies to the reforms and increased costs of medical coverage as the key effects of healthcare reforms.
The effect of healthcare reforms on insurance companies is in terms of its profit margins, administrative costs, medical expenses, membership growth and medical management. The insurance companies, thus, strive to control such factors to provide adequate medical coverage (Salomon 6). The reforms in healthcare affect the insurance business by creating a lot of risks and adverse selection. In this case, the majority of the members are ill. They consume more medical expenses that the company pays out, which reduces the entire profit margin of the company (Michael Para. 5). Attempting to minimize such risks through ”condition exclusions and lifetime benefits” (Moffatt 17) only forces the company to carry more risks. Creating large networks, not only results in higher costs of premium, but also the inability to control the costs in the new market.
Healthcare reforms reduce the profits made by the insurance companies, as they have to spend a lot of revenue on healthcare claims. Therefore, they can only maximize the profit upon the reduction of administrative expenses. In addition, with the government regulations, ”the company will not be able to differentiate itself by having better benefits nor will it be able to control costs by having less rich benefits” (Salomon 2). Moreover, adverse selection can kill the company because the majority of the insurance takers are sick people. Employing the remedy of making many young and healthy persons take the plan increases the profit of the company. However, it only worsens the situation by creating inequity in medical coverage (Michael Para. 1). Since reducing administrative expenses results in a corresponding reduction of the number of staff, many people will remain unemployed. Therefore, the company minimizes medical expenses, eliminates high-cost providers and specialists so that they remain competitive by attracting young and healthy individuals (Moffatt 21).
The negative side effects of lowering network costs to appeal for a healthy population, hard negotiations and termination of high costs and many employees to reduce administrative costs are diverse (Salomon 5). It would result into a smaller network due to the less choice of membership. In addition, there would be ”loss of the highest quality providers, and a reduction in the service offered to providers and members because of the staffing cuts” (Michael Para. 3). However, these negative effects ensure the survival of the insurance company from the changes coming from both the healthcare reforms and the competitive market.
Employers are reacting to health care reform challenges due to its implications for ‘‘retention, recruitment, productivity, workforce planning, and management changes’’ (Salomon 7). They believe that the Patient Protection and Affordable Care Act (PPACA) can assist them access affordable healthcare to improve workforce health. Several employers are certain that healthcare reform will only increase costs and possible exodus from retiree medical requirements instead of lowering costs of medication. In addition, individuals anticipate the reduction of the number of firms providing medical benefits due to healthcare reforms (Salomon 3). For instance, since most insurance companies that offer retiree medical ought to offer ‘‘minimal essential coverage to full-time employees or pay a penalty’’, more than a half percent of their plans aim at terminating such programs.
Works Cited
Michael, Hill.Community Advisory Board— Health-care Reform: Assessing the Real Effects, 2011. Web.
Moffatt, Jeffry. Effects of Healthcare Reform: The 2011 Outlook for Physician Practice Valuations. Value Examiner 1.1 (2010): 12-22.
Salomon, Joshua. Effects of Healthcare Reforms on Coverage, Access, and Disparities: Quasi-Experimental Analysis of Evidence from Massachusetts. American Journal of Preventive Medicine 1.41 (2011): 1-8.