One of the provisions of the Affordable Care Act--Obamacare--is the requirement that 80% to 85% of health insurance premiums go toward actual medical costs and not to overhead and profit of the insurers. Otherwise the policy holder is due a refund at the end of the year.
This medical loss ratio went into effect in 2011. Now we our learning exactly how beneficial this part of Obamacare is for the American public.
The Kaiser Family Foundation has estimated that small businesses are due about $377 million in health insurance rebates thanks to President Obama's healthcare reform. Big business should receive about $541 in rebates and individuals about $426 million.
This is the second Obamacare provision that is making health insurance more affordable for small business. Since the reform was signed into law in 2010, hundreds of thousands of qualifying small businesses have been receiving federal tax credits for offering health insurance as an employee benefit.
And there is more good news on the healthcare front. According to the Centers for Medicaid and Medicare Services health care spending nationally is experiencing its slowest rate of increase (4% a year) in 50 years.
Controlling health care costs was something that most of us felt that Obamacare did not sufficiently address. And while the Great Recession has played a role in restraining healthcare spending over the last few years, experts agree that the economy doesn't deserve all the credit for bending the healthcare cost curve.
Here are some of the other explanations offered by health economists.
- Many insurers and health systems are moving to accountable care that rewards quality of care not quantity, focusing on patient follow-up to insure physician instructions and medication regiments are being kept in order to prevent expensive visits to the hospital.
- There has been an increase in high-deductible health plans that require people to pay more out of their pockets for healthcare costs before insurance benefits kick in resulting in people opting not to seek medical attention, even vaccinations (i.e. self-imposed healthcare rationing).
- A lack of expensive new drugs hitting the market and more emphasis on using generics is holding back increases in pharmaceutical costs—a major healthcare spending driver.
- Efforts to reduce medical errors that result in expensive and needless healthcare services are working.
But in addition to all these contributing tangible factors is the meaningful, if hard to measure, effect of the country’s attention being focused on the need for healthcare reform.
According to Mark McClellan, President George W. Bush’s Medicare and Medicaid director, past slowdowns in healthcare spending “have occurred not just because of the direct effect of reforms, but because of greater attention to reforms changing provider and patient behavior.”
When we all are talking about a problem and what to do about it, that alone can change our behavior. Patients are a little more willing to take care of themselves and be more thoughtful in the medical services they seek. Doctors and hospitals are a little more aware of the cost of procedures and best practices. And insurers are a little more demanding on healthcare providers and a little less on raising premiums.
Frank Knapp, Jr. is President & CEO of the South Carolina Small Business Chamber of Commerce. Cross-posted at www.unconflictedsc.com.
May 1, 2012