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Health Insurers Find Stable Footing in 2019

According to a recent report from S&P Global Ratings, 2019 should be a strong year for health insurers. The financial analyst firm predicts that the American health insurance market is likely to remain stable over the course of the year.

Conditions are generally favorable for those doing business in this sector at the moment. For one thing, the American job market has been growing. As more people get hired, more people opt into employer-sponsored health insurance. This, in turn, boosts the number of customers covered by insurance companies.

There’s also significant business available for insurers in the area of government-sponsored health coverage since private health insurance companies can participate in federal or state-based health insurance exchanges. S&P noted that these markets are seeing greater stability now than in the earlier years of the Affordable Care Act. According to some predictions, 2018 will be the highest year of earnings for marketplace insurers. One sign of the health of the exchanges is that new participants have been joining the marketplace’s insurer lineups in recent years.

Are Better Times Ahead For Carrier & Consumers?

Operating managed Medicare or Medicaid plans is another way that many insurers choose to participate in the realm of government-sponsored healthcare. As Baby Boomers are turning 65, Medicare enrollment numbers are going up, and many of those enrollees are opting for Medicare Advantage plans. These private alternatives to traditional Medicare offer robust benefits without a robust price tag. Managed plans are also becoming a common trend among state Medicaid programs.

As a result of the favorable health insurance market, the majority of health insurers under S&P’s purview received a rating of “A” or better at the end of 2018. Despite the positive news, the analyst firm notes that there are some issues looming that could reduce the future stability of the market.

The continued viability of the ACA is one such concern. On the one hand, because Democrats gained control of the House of Representatives during the November 2018 midterm elections, the probability of a congressional ACA repeal seems unlikely to happen in the near future.

On the other hand, the Trump administration may continue to attempt changes to the ACA through other means. Furthermore, in light of a late 2018 ruling from a federal judge, the constitutionality of the healthcare law will once again end up before the Supreme Court.

Also of concern is the fact that healthcare costs around the country continue to rise. Climbing costs could affect insurers’ financial stability. And several mergers of large companies have led to the creation of even larger healthcare giants, which will impact the healthcare industry – for better or worse, it remains to be seen. Near the end of 2018, Cigna Corp. and Express Scripts finalized their deal, and Aetna and CVS Health did the same.

Involvement in government-sponsored healthcare can involve a good deal of red tape. While major healthcare companies often have the manpower and departments to handle this, smaller insurers may find themselves struggling to stay ahead. Federal and state exchanges have seen the entrance of many new insurers over the last few years, which has given consumers greater choice. It’s possible, though, that some of the smaller players, unable to keep up, will once again exit over the next few years.

It’s also possible, however, that the natural response to these company mergers may simply be that collaboration across healthcare entities increases. This could lead to greater efficiency and productivity.

In the short term, S&P analysts predict that payment-and-delivery reform will be a key focus for insurance companies this year. Attempting to follow through with the ACA’s provisions regarding value-based payments may be an additional source of increased collaboration between healthcare entities.

Another Area Affected By Government Shutdown: Food Inspections

The federal government’s shutdown is touching the lives of more than its furloughed employees. From issues reported at national parks to potential delays in processing upcoming tax returns, the shutdown is creeping into the lives of every American. Now the Food and Drug Administration (FDA) is reporting that they have suspended routine food inspections.

What’s Been Affected So Far

FDA director Dr. Scott Gottlieb said the agency has halted routine safety inspections of seafood, fruits and vegetables and other foods due the federal government’s shutdown. The FDA oversees nearly 80 percent of the food supply in the United States. Their inspectors visit about 160 food processing and manufacturing plants per week. More than 30 percent of those are considered to be at high risk of causing food-borne illnesses. According to statistics from the Centers for Disease Control and Prevention, food-borne diseases are responsible for well over 100,000 hospital visits each year in the U.S., with some 3,000 deaths reported annually.

Not all inspections have ceased. The agency said 100 percent of foods imported from other countries continue to be inspected and that critical functions, such as monitoring outbreaks of food poisoning, have not been affected. Sampling of some frozen foods has also continued. The Department of Agriculture handles inspections of meat and poultry products and they report that 89 percent of their food safety employees are still on the job, though they are not being paid. Also, restaurants are overseen by local health agencies and are not affected by the federal shutdown.

Officials Aren’t Overly Concerned — Yet

While admitting the situation is not ideal, officials say there is not a big need for public concern at this point. Director Gottlieb said the FDA is working to bring back about 150 employees to inspect foods that represent higher risks to the public, such as cheese products, infant formula and fresh produce. He’s hopeful this could happen as early as next week.

Sarah Sorscher, from the Center for Science in the Public Interest, said the FDA’s suspension of routine food inspections isn’t an immediate cause for concern, but will be if the shutdown continues. “That’s more and more issues they’re potentially not catching,” she said. In addition to missed inspections, a long-term shutdown could impede the agency’s ability to implement new food safety standards, according to Sorscher.

Officials remain optimistic that an agreement between political leaders will be reached to end the shutdown and stress that there’s no need for the public to worry about the safety of their at this point. However, it’s a story that bears watching if the shutdown continues.

Beware the Trade-Offs for “Medicare for All”

In 2017, Senator Bernie Sanders introduced legislation that would expand Medicare into a universal health insurance system for the country. The bill, known as Medicare for All, was supported by at least 15 Democratic senators and would provide universal health coverage without any premium costs for consumers.

Senator Sanders believes that the healthcare system in America needs to be completely overhauled. Over the past five years, premiums have doubled and deductibles have gone up 40 percent. Many insurance plans have small networks that only offer a limited number of providers and hospitals. When the closest hospital is outside the network, this can lead individuals to run up extensive bills if there is an emergency.

How Would It Work

According to Sanders and his supporters, Medicare for All would build on the Affordable Care Act, which allowed millions of Americans to obtain health insurance. But proponents of universal healthcare believe that the federal government could do more. There are still 29 million Americans without health insurance, and millions remain underinsured because they can’t afford the high copayments and deductibles their policies require.

Medicare for All would separate health insurance from employment. It’s billed as a healthcare proposal that would spur innovation and allow people to live healthier lives. Employers would no longer spend time focusing on how to provide health insurance to their employees and spend more time focusing on growing their business.

The plan would create a federally administered single-payer healthcare system, covering inpatient and outpatient care, including long-term, primary and specialty care. Prescription medications, vision, dental, hearing, mental health and substance abuse coverage would also be included under this proposal.

Estimated Costs

In July 2018, the Mercatus Center at George Mason University reported that the program would cost the federal government around $32 trillion over a 10-year period. Sanders suggested when he introduced the bill that most Americans would support a tax increase if it meant household healthcare costs would be reduced. Critics of the idea say that the estimated cost would be difficult for the federal government to absorb. The Mercatus Center is not alone in its estimates as the Urban Institute came up with similar figures in 2016.

Other Countries

Canada currently has a single-payer system that has been implemented successfully, which many proponents of Medicare for All use to demonstrate how the program could work in the United States. Canadians pay about the same in income taxes as Americans. However, in a 2017 comparison of 11 high-income countries, Canada’s healthcare system ranked ninth and the United States ranked last. In addition, Canada covers most medical needs, but people often purchase a second, private plan for unmet health needs like prescription drugs. In Britain, the government owns hospitals and employs specialists via the National Health Service. There are often long waits for care in Britain, which is addressed by a small private system that caters to wealthier people who want faster access to treatments.

The problem in comparing the United States to other industrialized nations with universal healthcare systems is that it’s much bigger from a population standpoint. Implementing a federal single-payer program would not only cost more but require a complete overhaul of the way the system works now.

As an example, hospital rooms in the U.S. are generally private or shared with one other person. In England, patients are more likely to be put in a ward, which could hold up to 24 beds divided into smaller sections based on level of care. European hospitals tend to be housed in older buildings that may not have started out as healthcare facilities, so planners conserve space and architectural integrity with a different setup than Americans are used to. A nationalized healthcare system would require American providers to rethink how they plan, build and administer hospitals – and this is just one instance of change.

Cost Negotiations

Proponents argue that a single-payer system could actually save money through healthcare cost negotiations. The federal government would be able to negotiate prescription drug and other healthcare costs. This means the $32 trillion could be cut somewhat if healthcare costs can be reduced. Administrative and pharmaceutical costs are much higher in the United States than they are in other high-income countries. Doctors also earn significantly more here as well, partly because there are more specialists – only 30 percent of practitioners in the U.S. are generalists – and specialists demand higher pay for their skills.

Under the Medicare for All plan, doctors would be paid about 10 percent less. It’s significant to note that a similar program proposed in Vermont was not pursued by the governor because it would mean an 11.5 percent increase in payroll taxes on businesses as well as a 9.5 percent income tax increase.

Gaining Momentum

Since Sanders presented the bill, the idea has been gaining momentum, even though he has yet to explain how his proposal would be financed. One New York Times poll found that 51 percent of Americans and 74 percent of Democrats supported the idea of a single-payer system. But a 2017 poll by the Kaiser Family Foundation found that support for the program dropped significantly when respondents were told taxes may increase or that the government could have more control over healthcare. There is also some confusion among Americans about how universal healthcare would work. Many polled believed they could keep their current health insurance under a single-payer plan, something that is not true.

There are still many variables that must be addressed regarding Medicare for All. There has been no discussion about what would happen to jobs at private insurers, although some believe those jobs could be repurposed into positions with the federal government. As Democrats start throwing their hats into the ring for the 2020 presidential election, healthcare will take center stage as a leading platform issue.