How large are these increases likely to be? Many industry observers were predicting price hikes in the range of 6% per year anyway, which would double the cost of health care in 12 years. To that figure, I add about $1.0 trillion. Not coincidentally, that is only slightly more than the ten-year cost of the present health care reform package. If we do not pay that money to the government, then the insurance companies will demand that we pay it to them.
There's more. If health reform fails, we can expect insurance companies to focus as never before on the practices that produce profit. Profits drive earnings, earnings power stock prices, and a growing stock price is the whole point of running a for-profit insurance company.
One of the keys to making money in health insurance is rigidly enforcing existing contract language on provisions like lifetime limits, exclusions for pre-existing conditions, and coverage rescission, and the companies will enforce those provisions as never before.
In addition, we can expect new restrictions on coverage for new and emerging therapies, and on payments for some medical goods and services now covered by insurance.
From the insurance company's perspective, the point is to weed out the customers who will cost you the most money. Because that's where the profit is.
Later, in 2011, we can expect the consequences of failing to pass health care reform to begin cascading through the American economy. I am not generally a doomsayer or catastrophizer but it is probably safe to say that what happens next will not be pretty.
Higher insurance costs will mean higher employer benefit plan costs. As they have done in the past, employers will try to offset those increased costs by cutting back on employee benefits or eliminating benefits plans altogether.
This will happen first in small- and medium-sized enterprises, the engines of America's economic growth. And it will increase dramatically the number of working Americans who are underinsured or uninsured. That will put additional financial pressure on Medicaid and the crazy quilt of state health plans now available.
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