Currently choices are limited for most health insurance consumers to the plans that are offered by their employer, or the plans that are sold through private plans within your geographical area. With the new health care reform bill on the horizon, the choices may widen for health insurance consumers.
With healthcare reform comes the promise of the Health Insurance Exchange. This concept involves many insurance companies offering competing plans of varying benefit levels and price points. Insurer's ability to avoid providing coverage to those with pre-existing conditions would be limited or eliminated, and new minimum levels would be established for health insurance providers. Competition will cause insurers to lose customers for poor service to other companies that can deliver to the policyholder's expectations.
Choices that are currently unavailable will now be available through the health insurance exchanges. Bargaining power will shift to consumers who will have more choices. This will create new market forces among insurers that may provide new opportunities for creative solutions within this market. One example of progress is the adoption of electronic medical records to speed up the administration of health insurance claims. Additionally, the advanced competition may work to bring health insurance costs down.
Economy of scale, competition, innovation and increased consumer power are all free market principals that have worked well in other industries, insurance included. The property and casualty insurance industry has enjoyed these benefits for years. The health insurance industry is currently regulated in that they may only sell insurance within a state where it is licensed. The property and casualty industry is under similar regulations, however it is much easier for a property and casualty insurer to maintain multiple state licenses than for a health insurer. Allowing them to operate across state lines will be a new endeavor for the health insurance industry.
The idea of health insurance exchange is not without its challenges however. One potential problem is that of adverse selection. This is the concept that only those in most need of insurance coverage are the most likely to purchase it, causing a situation whereby most of the premium collected will be used to pay claims. Over time this would cause premiums to rise, not fall as hoped under a health insurance exchange. Under the current reform plan, it is expected that health insurance products under the exchange would be introduced to consumers in stages in order to avoid such a situation. Individuals, the self-employed and small businesses will likely be the first to engage business under health insurance exchanges.
Of all potential benefits, choice may well be the one benefit that will make the idea of health insurance exchanges stand as a successful reform component. The competition caused by this choice can only affect large insurance companies in one way - it will force them to recognize the power held by their customers to pull business away from them. This power may likely cause a profound change in the health insurance industry.
Jeremy Lewis is an Insurance Agent in the North Bay Area California. His family business has been assisting Californians for over 30 years obtain in obtaining quality healthcare.
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