5 Major Components of Health Care Reform

1) Health Insurance Exchanges

The creation of health insurance exchanges is easily one of the biggest components of health care reform. Health insurance exchanges are basically online marketplaces where people can go to a website, type in their information, and immediately get offers for insurance coverage. They will be State run unless a State opts for the Federal Government to run their exchange (most have opted to have the Federal Government run theirs). The official “launch” date of the exchanges is January 1st, 2014, though the current plan is for enrollment to begin in October of 2013. Whether these deadlines will be met or delays will happen is yet to be seen.

2) Medical Loss Ratio (MLR) and Rebate Checks

One of the requirements of Health Care Reform is that insurance companies spend a certain percentage of premiums on medical costs. The medical loss ratio, or MLR, is the official calculation of how much premium revenue is spent on medical costs. MLR ratios are calculated for aggregation sets, which is a fancy word for State, Line of Business, and Legal Entity Breakouts. So how much an insurer spends on medical in Arkansas has no impact on the MLR ratio on people in Indiana, and vice versa. It gets more complicated, but that’s MLR at a high level.

If you are on an individual or small business health plan, insurers must spend 80% of premiums on medical or pay rebates for the difference. Insurers must spend at least 85% of premium on medical for large group business or pay rebates.

3) Pre-Existing Conditions Will Be Covered

A major component of health care reform is that no one will be denied coverage because of a pre-existing condition. This is great news for many who have had to figure out how to get their pre-existing condition treated without going bankrupt. Of course, this has also posed a problem: how do you make health insurance affordable if you cover every claim? The answer is bringing everyone – healthy and unhealthy alike – into the health care system via exchanges.

4) Rate Bands – Insurance Rate Variance Will Be Limited

As I explained in my post Why Health Insurance Premiums Will Increase for Young Adults in the United States I discussed rate bands and how they are an important part of health care reform. Essentially they are meant to limit rate variance, or the amount that the cost of premiums can vary from person-to-person.

5) Dependents Can Remain on Parent’s Insurance until age 26

A fifth major component of health care reform is allowing dependents to remain on their parent’s health insurance plan until age twenty-six. This is a fairly straightforward regulation that attempts to help ease the transition that young adults face when going from high school to the work force or from college to the work force. No doubt the weak economic climate influenced the inclusion of this regulation.

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