Michael Gallagher: Unintended consequences of health reform

Published: Wednesday, February 27, 2013 at 5:26 p.m.
Last Modified: Wednesday, February 27, 2013 at 5:26 p.m.

Michael P. Gallagher: Unintended Consequences of Health Reform

We all hope that health reform will improve access to millions of Americans who are unable to obtain or afford coverage today. That was certainly the intent -- to bring down premiums by spreading the cost over a larger risk pool.

However, with approximately 10 months before the law's major provisions go into effect in January 2014, nearly everyone is questioning its affordability.Will some provisions unintentionally drive individuals and small businesses away by increasing across-the-board costs?

Several key factors are worrisome to the nation's health plans and consumers because of their inflationary impact, including the underlying drivers of rising health care cost, the way individual health insurance is priced, minimum essential health benefits and a new health insurance sales tax.

Reform changes the way individual health insurance is priced, strictly limiting variations in premiums. This means that the younger and healthier people who were needed to help balance out the risk pool will actually pay a lot than more than under the old formula. Many experts believe younger and healthier people may now hold back knowing they can get insurance when they really need it.

This “wait until I need it” scenario seems even more likely when we consider the penalty for not buying coverage. It's only a $95 penalty in the first year -- significantly lower than the cost of an insurance policy and well below the added cost of the new health insurance sales tax.

The new tax starts in January 2014 at $8 billion a year, rises to $14.3 billion in 2018 and will increase each year thereafter. The nonpartisan Congressional Budget Office is on record saying that the burden of the new fee will be mostly borne by consumers. The Joint Committee on Taxation estimates that the tax will add $350 to $400 annually to family premiums in 2016.

With so much at stake, doesn't it make sense to revisit any provisions of the law that will raise costs for consumers, without providing commensurate benefits?

Our country needs health reform to work and be affordable. These unintended consequences fly directly in the face of the critically important goals of reform, and it is coming at a time when small businesses and middle-class families can least afford it.

At AvMed we're serious about making care affordable. We invest in technology for greater efficiency and support members who are trying to better manage their conditions and live more healthy and productive lives. Both members and employers are suddenly clamoring for information on the value of generics or calculating costs before an elective procedure. Workplace wellness is growing in popularity. The signs are certainly encouraging.

As reform proceeds, we at AvMed are going to do everything we can to make coverage as affordable as possible for the more than 300,000 Floridians we serve. We will do our part, and we will work closely with doctors, hospitals and community leaders to effectively implement the law. Washington should do its part by repealing the new health insurance tax.

Michael P. Gallagher is President & CEO of AvMed Health Plans, one of the oldest and largest not for profit health plans in Florida.

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