In the last few months, we’ve seen many Health Care Reform rules and regulations introduced by the Health and Human Services Department. Every time that happens, the media gets hold of it, and all kinds of articles are written in the Wall Street Journal, the New York Times, and the TV network news programs talk about it. All the analysts start talking about the pros and cons and what it means to businesses and individuals.
The problem with this is that many times, one writer looks at the regulation and writes a piece about it. Then, other writers start using pieces from that first article and rewriting parts to fit their article. When the information gets widely distributed, the regulations and rules get twisted and distorted. What shows up in the media sometimes doesn’t truly represent the reality of what the laws say.
There’s a lot of misunderstanding about what is going on with ObamaCare, and one of the things that I’ve noticed in discussions with clients is that there’s an underlying set of myths that people have picked up about healthcare reform that isn’t true. But because of all they’ve heard in the media, people believe these myths are true.
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Today, we’re going to talk about three myths I hear most commonly. Not everybody believes these myths, but enough do, and others are unsure what to believe, so it warrants dispelling them now.
The first one is that healthcare reform only affects uninsured people. The second one is that health care reform doesn’t affect Medicare benefits and the Medicare program. And then the last one is that healthcare reform is going to reduce the costs of healthcare.
Health Care Reform Only Affects Uninsured
Let’s look at the first myth about healthcare reform only affecting uninsured people. In many of the discussions I have with clients, they use several expressions: “I already have coverage so that I won’t be affected by ObamaCare,” or “I’ll just keep my grandfathered health insurance plan.” The last one – and this one I can give them a little bit of leeway because part of what they’re saying is true — is “I have group health insurance so that I won’t be affected by health care reform.”
Well, the reality is that healthcare reform is going to affect everybody. Starting in 2014, we’re going to have a whole new set of health plans, and those plans have wealthy benefits with lots of extra features that the existing programs today don’t offer. So these new plans are going to be higher cost.
Health Care Reform’s Effect On People With Health Insurance
People who currently have health insurance are going to be transitioned into these new plans sometime in 2014. So, the insured will be directly affected by this because their health plans are going away today, and they will be mapped into a new ObamaCare plan in 2014.
Health Care Reform Effect On The Uninsured
The uninsured have an additional issue: if they don’t get health insurance in 2014, they face a mandate penalty. Some healthy uninsured will look at that penalty and say, “Well, the penalty is 1% of my adjusted gross income; I make $50,000, so I’ll pay a $500 penalty or $1,000 for health insurance. In that case, I’ll take the penalty.” Either way, they will be directly affected by healthcare reform. Through the mandate, it affects the insured as well as the uninsured.
Health Care Reform Effect On People With Grandfathered Health Plans
People with grandfathered health insurance plans will not be directly affected by health care reform. But because of the life cycle of their grandfathered health plan, it’s going to make those plans more costly as they discover that there are plans available now that they can easily transfer to that have a richer set of benefits that would be more beneficial for any chronic health issues they may have.
For people who stay in those grandfathered plans, the pool of subscribers will start to shrink, and as that happens, the cost of those grandfathered health insurance plans will increase even faster than it is now. Therefore, people in grandfathered health plans will also be impacted by ObamaCare.
Health Care Reform Effect On People With Group Health Insurance
The last one, the small group marketplace, will be most affected by healthcare reform. Although the regulations predominantly affect large and medium-sized companies and companies with 50 or more employees, smaller companies will also be affected, even though they’re exempt from ObamaCare itself.
Many surveys and polls are starting to show that some businesses with 10 or fewer employees will consider seriously dropping health insurance coverage altogether and no longer making it an expense. Instead, their employees will get health insurance through the health insurance exchanges.
Not just the uninsured will be affected by healthcare reform; everybody will be impacted. Some carriers now anticipate that up to 50% of small groups with ten or fewer employees will drop their health insurance plan sometime between 2014 and 2016. That will greatly affect all people with group health insurance, especially if they’re in a small company that drops health insurance coverage. The;
Health Care Reform Will Not Affect Medicare
The next myth was that healthcare reform would not affect Medicare. This one is funny because right from the very beginning, the most notable cuts specifically targeted the Medicare program. When you look at Medicare’s portion of the overall federal budget, you can see that in 1970, Medicare was 4% of the U.S. federal budget, and by 2011, it had grown to 16%.
If we look at the last 10 years, from 2002 to 2012, Medicare is the fastest-growing part of the major entitlement programs in the federal government, growing by almost 70%.
Because of Medicare’s size and rapid growth, it’s one of the key programs that ObamaCare is trying to handle so it doesn’t bankrupt the U.S. Medicare will be impacted. The initial cuts to Medicare have already been set at about $716 billion.
Medicare Advantage Cuts And The Effects
Of those $716 billion cuts, the Medicare Advantage program will be cut the most and will see the bulk of the effects. This will increase the premiums people pay for their Medicare Advantage plans and reduce their benefits.
Increased Medicare Advantage Costs
Many people now choose Medicare Advantage plans because they have zero premiums. When given a choice on Medicare plans, they view it as an easy choice because it’s a free program for them, “Sure, I get Medicare benefits, I don’t pay anything for it; why not.” Now, they’re going to see Medicare premiums climb from zero to $70, $80, $90, $100. This year, we’ve already seen that with some of the Blue Cross Medicare Advantage plans. It’s going to get worse as we go forward in the future.
Reduced Medicare Advantage Benefits
Many Medicare Advantage plans will increase the copayments, increase the deductibles, and change the co-insurance rates to minimize the premium increases. They’ll push more costs onto the Medicare Advantage recipients to keep the premiums down. We’re going to see increased tips and reduced benefits coming in the Medicare Advantage plan.
Fewer Medicare Physicians
And then, if that wasn’t bad enough, as Medicare doctors begin receiving lower and lower reimbursements for Medicare Advantage people, they will stop taking new Medicare Advantage recipients. We’re going to see the pool of doctors to support people in Medicare starting to shrink unless changes are made over the next five years. So Medicare will be affected, and it will be affected dramatically by health care reform. Everybody’s kind of on pins and needles, waiting to see what will happen there.
Health Care Reform Will Reduce Healthcare Costs
The last one, and probably the biggest myth about health care reform, is that everybody thinks ObamaCare will reduce healthcare costs. That’s completely hogwash. Early in the process, when they were trying to develop the rules and regulations, the emphasis and one of the goals for reform was to reduce healthcare costs.
, The goal shifted from cost reduction to the health insurance industry regulation somewhere along the line. Once they made that transition, they pushed cost reductions to the back burner. There are some small cost reduction components in ObamaCare, but the real emphasis is regulating health insurance. The new plans, for example, have much richer benefits than many plans today: richer benefits mean richer prices.
