With health insurance everything old is new again. When the HMO (Health Maintenance Organization) became popular 25 years ago, both employers and insurers saved millions in costs.
Unlike the more traditional indemnity plans, the HMO only covers medicals services which are provided by a tightly controlled network of physicians and hospitals who have agreed to treat patients at a cost determined by the insurance company.
This contractual arrangement is intended to give the doctors and hospitals a steady stream of patients who must use their services. If the patient goes outside the network, the patient must pay 100% of the cost of their medical care.
The insurance companies can set guidelines and restrictions on care and treatment within the network.
Major insurers study the return to the HMO model
The impact of the new federal law, the Patient Protection and Affordable Care Act will impose new limitations on what insurance companies may and may not do. Many of the provisions will not be fully implemented until 2014.
The most important and most costly part of the PPACA will be the provision which does not allow insurance companies to decline (refuse to insure) any person who has a pre-existing medical condition.
The law offers a trade off to the insurance companies. The individual mandate would require all Americans to purchase health insurance. This provision would give health insurance companies millions more customers. Many of these customers will be the young and healthy who never bought health insurance before because they felt it unnecessary.
But the insurance companies, fearful of declining profits, are not satisfied with this trade off. They argue that the majority of people who will enter the health insurance market are those whose health conditions will be expensive. They do not believe that the millions of healthy new members will sufficiently protect their profits.
Of course, the individual mandates are under legal attack. Lawsuits challenging the constitutionality of the individual mandate have been brought by states, individuals and organizations.
Free choice will be the loser
During the debate over health care one of the key issues was freedom of choice. Proponents of the law argued that Americans would continue to have the ability to keep and/or choose the doctors and hospitals they liked.
Opponents of the law warned that access to doctors and hospitals would be sharply restricted. As a result of these restrictions, it was furthered argued that waiting lines to see a doctor or have a procedure done would become common.
The White House points out that PPACA does limit health insurers from offering “overly restrictive” networks. Nancy-Ann DeParle, the director of the White House Office of Health Reform, has said that standards are being developed to make sure patients have “enough choice” of doctors and hospitals.
The latest moves by the country’s largest insurers would seem to indicate that there may be a wide difference of opinion as to what constitutes “enough choice.”
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