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What Healthcare Reform May Mean for the Heathcare Industry
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The insurance industry has something of a love-hate relationship with healthcare reform. Managed care executives were alternately courted and scolded by the Obama adminstration, as the fortunes of the bill waxed and waned. Now that it’s been enshrined in law, WNPR’s Harriet Jones takes a look at what reform may mean for the industry.

In theory, the passage of healthcare reform should be a boon to the health insurance industry. The new act mandates that everyone buy coverage, and the Congressional Budget Office estimates that could mean up to 32 million new customers for the insurers - many of them young and healthy. But John Thomas, director of the Center for Health Law and Policy at Quinnipiac University says, there’s a catch.

“The penalty provision, for those who don’t buy insurance, is not nearly as much as the insurance itself. If the reconciliation act goes through, that penalty will be reduced to something like seven or eight hundred dollars. If we postulate that the average insurance policy for a person costs about $6,000, certainly I don’t think the penalty is enough to make people buy insurance.”

Hartford-based Aetna has been among the most vocal companies on the need for some type of reform. After the signing of the bill, the company issued a statement welcoming the promise of broader access to health insurance. But Aetna President Mark Bertolini says the main failing of the bill is that it does very little to contain skyrocketing medical costs.

“We won’t be able to afford it. The state of Massachusetts is well over a billion dollars in debt as a result of what they are doing with their health reform, and they’ve already started to call for payment reform in the way of global payments for providers, so I think it doesn’t take a genius to see that ultimately costs will become an issue. The economic problems of this nation are largely around healthcare and entitlement, and I think we will need to address costs.”

Cigna CEO David Cordani is on record saying the Act will force up premiums, in part because of new taxes on insurers. In the last few weeks before passage of the bill, insurance executives were taken to task over their profit margins. Jacob Hacker, professor of Political Science at UC Berkeley says here, the legislation takes action.

"There will be a limit on the amount of administrative spending as a share of premiums that insurers can have. And that will be tied to rebates to people in insurance plans, so that if your insurance company is spending more than 20% of the amount that you’re paying in premiums on administration rather than medical costs, you’re going to get the difference back. So I think that will create some pressure on insurers to lower their administrative costs."

Connecticut has a bigger stake than most in how these many factors play out for the industry. It’s estimated some 25,000 jobs here are dependent on health insurers.

For WNPR, I'm Harriet Jones.