Six Ways Obamacare Will Lower Your Health Insurance Costs
Originally Posted by BBII
2. ACA does absolutely nothing to mitigate cost. It works overtime to hide cost. Which is problem #1 with our health care system and the employer-based model today.
How is this possible?
Because, the magic of Obamacare is simply basic economics.
Here are six economic reasons why the Affordable Care Act marketplaces reduce premiums.
More Competition. Generous subsidies and an individual mandate create a lucrative pool of formerly uninsured consumers. Insurers will compete with each other to gain market share, driving premium prices down.
Less Adverse Selection. The Achilles’ heel of the individual insurance market is adverse selection. This occurs when one side of a transaction lacks the necessary knowledge to make the transaction. Insurers typically lack precise information about the health profiles of their customers, but they do know the people most likely to buy health insurance are often the sickest. As a result, they raise prices to cover risk, which increases prices for everyone in the market. Obamacare’s individual mandate ends the cycle. Put simply, if everyone is required to buy health insurance, insurers can afford to charge less.
Lower Transaction Costs. Information is a key to market efficiency. For the invisible hand to match supply and demand, consumers must make informed decisions, which has traditionally been quite difficult. In the new marketplaces, insurers are required to present their offerings and benefits in standardized formats. Prices will be clear and simple to compare.
Lower Administrative Costs. Under the ACA, the share of premiums insurers spend on actual medical services, as opposed to administrative costs, will be subject to a floor. If insurers spend less, they are required to rebate the balance to plan participants. Consequently, insurers will have less ability and incentive to pad premiums, creating savings for consumers.
Rate Review. The ACA empowers the HHS and state regulators to review premium increases. Insurers can be required to justify unreasonable increases, which will be made public. Although regulators do not have the power to limit rate increases, public shaming may have the same practical effect.*
Better Quality. Even in the absence of premium reductions, consumers will see savings and an improvement in the quality of coverage. What your premium buys you is more important than its price sticker, and under the ACA, consumers will get bigger bang for their buck. Qualified marketplace plans are required to cover all essential health benefits, including preventive services.
Obamacare cost-cutting: CNBC explains
A number of provisions of the Affordable Care Act, many of which have already gone into effect, are directly aimed at reducing the growth of health-care spending, which accounts for nearly one-fifth of the overall U.S. economy.
The law also encourages hospitals, primary care physicians and other medical providers to join forces in so-called Accountable Care Organizations, whose goal is to coordinate care for their patients and, if they meet certain quality targets such as keeping those people healthy and out of the hospital, get paid more by Medicare.
Obamacare also created the Independent Payment Advisory Board, which is empowered to recommend reductions in Medicare spending, in years in which Medicare per capita costs exceed specific targets including overall medical prices. Those reductions will take effect unless Congress comes up with another reduction that saves the same amount.
Obamacare's provision that insurers' policies cover things such as preventative care for customers is also geared to reducing overall long-term costs. The theory is that people who can obtain preventative care, and actually do with, will be less likely to suffer chronic health conditions that could end up costing much more.
I think that last paragraph is the most important. Until now, people without health insurance waited until the last minute to get medical attention and then showed up in ERs when their illness was at an advanced stage and required expensive care. Those same folks will now be insured and able to go to a doctor well before their diseases get out of control. Early treatment will lead to cost savings.