Coverage mandate likely spells end of for profit medical insurance in U.S.
The enactment of the Patient Protection and Affordable Care Act requiring all Americans to have medical insurance in 2014 follows in the footsteps of nations like Germany and Switzerland that opted not to put in place socialized health care systems like those of Britain and France or Canada’s single payer system where the government pays all medical bills. Germany and Switzerland mandate all citizens have coverage. But it’s no bonanza for medical insurers. They fiercely compete for mere survival and not to earn profits. If they don’t efficiently administer claims and keep providers and government regulators satisfied, they could find themselves out of business. For profit U.S. medical insurers could find themselves in a similar market environment within a decade.
Indications of tighter regulation of medical insurance premiums — and ultimately insurer profits — are already emerging in the nation’s most populous state. Last week, a California state Assembly committee approved legislation that would regulate health insurers like their counterparts in the state that sell property/casualty insurance. Those insurers cannot use premium plans until regulators first approve them.
AB 2578 would similarly subject premiums, co-payments, and deductibles of both indemnity health insurers and managed care plans to this prior approval regulatory scheme. If policyholders or plan members would pay seven percent or more above those currently in effect, it would trigger a provision allowing consumer and public interest groups to protest the filing through a public utility commission style hearing.
Nonprofit health insurers already operate in California, most prominently Blue Shield of California. A de facto shift of medical insurance to a nonprofit business could give Blue Shield a leg up, although it would be under increased pressure to hold down adminstrative overhead. (Notably, Blue Shield supported California reform legislation proposed by Gov. Arnold Schwarzenegger in 2007 including a requirement that all state residents have some form of medical coverage. For profit insurer Anthem Blue Cross opposed the bill).
All payers — whether they are in business to make a profit or not — complain they are increasingly squeezed by raging medical treatment cost inflation. According to Anthem Blue Cross, those out of control costs forced it to sharply raise premiums for its individual insurance products by as much as 39 percent, sparking outrage and giving a political boost to AB 2578. A similar bill went nowhere in 2009.