It takes insurance companies a lot of time and effort to figure out how to deny coverage to insured patients or to write policies that allow them to duck their obligations when people get really sick.
The Senate health care reform package relieves insurance companies of much of that financial burden, according to a new study released Monday by the Congressional Budget Office.
By making insurance coverage more uniform and banning exclusions based on preexisting conditions and other industry tactics to reduce coverage, reform will reduce insurers' administrative costs, according to the report.
"Compared with plans that would be available in the nongroup market under current law, nongroup policies under the proposal would have lower administrative costs, largely because of the new market rules," notes the CBO. "Administrative costs would be reduced by provisions that require some standardization of benefits -- for example, by limiting variation in the types of policies that could be offered and prohibiting 'riders' to insurance policies (which are amendments to a policy's terms, such as coverage exclusions for preexisting conditions); insurers incur administrative costs to implement those exclusions."
New customers, required by reform legislation to purchase health care, will also generate savings, the report predicts. "The influx of new enrollees in response to the individual mandate and new subsidies -- combined with the creation of new insurance exchanges -- would create larger purchasing pools that would achieve some economies of scale."
In general, the CBO estimates that the Democratic reform plan will reduce the premiums that most people pay while improving coverage.
The changes will have the least impact on those insured through their employer. There's justice in that distinction: Voters with employer-based coverage have long been an obstacle to fundamental health care reform because they fear losing the coverage they have. Under the reform plan, they won't lose their current coverage. But, the CBO says, their coverage won't get much better, either.