Health Reform Legislation Essay

1390 Words 6 Pages
Under the Patient Protection and Affordable Care Act, underwriting will effectively disappear. Enrollee demographics and medical history can no longer be used to calculate premiums. Two exceptions allow for rate variation based on age and smoking, although even in those cases the degree of variation is legally capped. Without the ability to use underwriting for risk selection or assigning premiums, insurers will have to find new ways to compete. Premiums will no longer reflect the underlying risks, and rate variation will cease to be a meaningful tool in competing for a healthy insured population.

Although medical underwriting can no longer be used for risk selection, the new law will provide some useful protections for insurance
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The new exchanges established by the PPACA will change the way consumers shop for health insurance. These electronic marketplaces will put a wealth of information at the consumer’s fingertips. Standardized plan ratings and benefit levels will make health plans easily comparable. The new law will characterize each health plan as Bronze, Silver, or Gold, depending on the level of benefits it offers. Plans within each level will have similar cost sharing structures and actuarial value. These standard benefit levels will leave insurers with two ways to distinguish themselves: price and quality.

In the new exchanges, the price and quality of a health plan will be more important than ever for consumers who are trying to get the best value for their money. Insurers who can find ways to reduce claim costs can offer more attractive premiums. One problem that contributes significantly to health care expenses is the overutilization of services. The chief danger of overutilization is that it results in higher medical costs without any accompanying improvements in quality. To be competitive, health plans must ensure that their expenses actually improve quality. Sound benefit design and a focus on providing high quality care can help diminish this problem. Even for plans where overutilization is not a problem, higher quality care can reduce complications, errors, readmissions, and other unnecessary costs. Better

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