Instituting a premium support system would presumably cause a large influx of Medicare beneficiaries entering the private insurance market. This would generate new business for insurance companies. However, it could also put pressure on profit margins, as health care costs per insured continue to increase, rates become more competitive and insurers experience more pressure to keep costs down. One private-sector study conducted by the Boston Consulting Group, which sought to determine how health care reform impacts insurers’ business model, found that insurance companies are urgently taking steps to curb costs, as a result of the Affordable Care Act (ACA) reform passed in 2010 and in anticipation of future Medicare reforms.
Insurers are attempting to curb growing per-person medical costs by utilizing both traditional methods such as lowering provider reimbursements as well as outcomes-based initiatives involving collaborative relationships with providers. Other initiatives focus on the insured and include more preventative measures, such as direct support for diagnostic screenings, health coaching and incentives for healthier living. These examples, taken from a survey conducted by the Boston Consulting Group in April 2011 of 120 health insurance executives representing 48 of the largest payers, provide evidence that the recent health care reforms, and discussion of pending Medicare reform, have led the private sector to think creatively about how to pursue greater cost control in the health care industry.
Meanwhile, insurance companies view the health care exchanges as an opportunity to expand their business and are reacting to the reform by increasing their retail sales and marketing budgets. The increased advertising in the insurance market could either be positive or negative for consumers, depending on the nature of the marketing campaigns. For example, if the advertising is aimed at differentiating the insurer through a clearer explanation of the insurance plan and its improved benefits, it could help the consumer make a more informed decision about which payer to select. However, if the increased spending on sales and advertising only creates more clutter in the market, it could confuse consumers about the exchange; many of them will be older adults with limited ability to understand the differences between plans. In addition, increased spending on marketing could put additional pressure on insurance companies’ profit margins, as it is an expense that government-run Medicare does not have.
What Is the Premium Support Option, and How Is it Different From Current Medicare?
How Would a Premium Support Payment System be Designed?
How Would Premium Support Contain Rising Health Care Costs?
How Would Premium Support Impact Provider Payments?
How Would Premium Support Impact Medicare Beneficiaries?