More importantly, Obamacare will require insurers to spend at least 80% of patient premiums on actual health-care services and will cap administrative expenses at 20%. This means that if insurers fail to spend at least 80% of their premium revenue on member health-care services, that it must write a check for the difference to members. In August, for instance, insurers were required to return $1.1 billion in premium payments to approximately 12.8 million members. Simply put, if you pay for a service you should get the rewards that come along with that service. The 80/20 rule will ensure that will happen!
4. It will expand the benefits of the average health plan.
The sands of time are definitely ticking on individual health-care plans, which, in some cases, offer nothing more than bare-bones coverage. According to a study done by the University of Chicago, about 50% of all individual plans will be inadequate in terms of the benefits they are required to provide under the PPACA, and will either disappear or evolve by the time it’s implemented in full in 2014.
Released in February, the Obama administration outlined 10 key benefits that will be required under the PPACA in health-care plans, including hospitalization, prescription drugs, maternity, and newborn care. With these benefits becoming a requirement under Obamacare, hospitals will be further shielded from doubtful/non-covered procedures and medications, and patients will have a broader scope of treatment options available to them. The point being that health-care members will be prepared for a myriad of ailments should they strike rather than merely jumping into the system when they get sick.
Another key point is that the PPACA disallows insurers from discriminating against patients with pre-existing conditions. Broad coverage will ensure all those who want health-care will be well-covered.
5. It will promote preventive health-care visits and should therefore reduce long-term care costs.
I believe one of the least talked about and most elusive benefits of bringing in up to 30 million people into the health-care system over the next decade is the amount of savings that will occur from an increase in preventative visits.
Broader health-care coverage in terms of individual plans, coupled with a Medicaid expansion expected to bring almost 16 million Americans under the Medicaid umbrella by 2014, gives previously uninsured individuals access to preventative medical care that didn’t previously exist. The most obvious beneficiaries from a financial perspective under this scenario are diagnostic companies and preventative medication suppliers.
General Electric Company (NYSE:GE), a conglomerate known best for the industrial side of its business, would likely be a beneficiary as its MRI and CT scanners could be more regularly used in preventative cancer detection. Likewise, prescription drugs like AstraZeneca plc (ADR) (NYSE:AZN)‘s Crestor, used to treat high cholesterol, should benefit as a preventative treatment to curtail the high risks of heart attack, stroke, and heart disease that come along with a high cholesterol diagnosis.
The end result of better preventative care should be fewer serious complications requiring expensive hospitalizations. With half of all health-care costs being spent on just 5% of the population, according to the Kaiser Family Foundation, keeping even a small percentage of the high health risk population healthier through regular preventative visits could mean billions of dollars in savings.
Stay tuned, as tomorrow I will examine the other side of the coin and point out five ways where Obamacare will fail.
The article 5 Ways Obamacare Will Succeed originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of General Electric and WellPoint. The Motley Fool recommends UnitedHealth Group and WellPoint.
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