Dr. James G. Hinsdale, president of the California Medical Association (CMA), recently speculated in an opinion published in the Sacramento Bee , July 2, 2011, that passage of AB
We all want to afford health insurance.
52 would restrict patient access to doctors and hospitals and result in more crowded emergency rooms. His logic is that regulated health insurance premiums will lead to reduced reimbursement for doctors and hospitals thereby restricting the supply of access to health care. AB 52 would allow the California Department of Insurance and the California Department of Managed Health Care to regulate health insurance premiums.
With our current recession and resulting high unemployment access to health care has already been pinched as families and individuals either lost employer sponsored health insurance or dropped coverage to save money. While there is a potential for restricted access caused by reduced compensation to providers, the current crisis of no access because of the lack of health insurance is a far larger issue. People are already using emergency rooms and urgent care centers as there primary care facilities because they can’t afford health insurance.
As with any economic model, a $1 increase in premiums will result in some percentage decrease in coverage as people drop insurance because of the cost. Once any government law is promulgated into regulation there is a direct impact on costs which ultimately affects supply and demand for the product or service. It is the job of any company’s management to react to the change in the market place to maintain revenues and profit. Similarly, management also speculates on proposed legislation and proactively adjusts inputs or pricing in anticipation of the market change.
With the advent of impending implementation of the Patient Protection and Affordable Care Act, national health care reform, and AB 52, business and advocacy groups are being proactive to protect their interests. The passage of AB 52 is particularly important today to protect consumers from industry speculation. Because the cost impacts of health care reform are not fully known, it is within reason to assume that health insurance companies will begin to spike rates as a hedge against future costs. AB 52 will help provide some cover for consumers against speculation.
As Dr. Hinsdale writes in his opinion, “The bottom line is that AB 52 won’t help doctors…”. Correct. AB 52 may not help doctors but perhaps it will help consumers hold onto their health insurance.
I seriously doubt that Pacific Gas & Electric enjoys their rates being regulated by the California Public Utilities Commission. Even with the regulation, PG&E continues to produce a profit, compensate upper management handsomely and the consumers get some relief from potentially monopolistic pricing.
Doctor and hospital reimbursement is at least one level removed from the effects AB 52. If insurance companies feel their revenue being unfairly restricted by regulation, the first level of cost containment will be a further reduction in benefits offered within individual and family plans.
Let’s face it, physician groups and hosptals can negotiate with insurers with respect to compensation. Consumers can’t negotiate for lower rates with the insurance companies; they have to take what is offered. In addition, if the insurance company does not like the risk of the individual they can decline coverage or tack on a rate increase. We have already seen insurance companies announce that they will ‘rate up’ children with pre-existing conditions on a family plan by as much as 300%.
I have yet to hear of an insurance company negotiating with a hospital to reduce their compensation when caring for child with a chronic illness. Dr. Hinsdale and the CMA are absolutely missing the point with AB 52. They are worrying over consequences that have yet to materialize or be measured. Insurance companies will find a way to be profitable within the light of regulation. The last people that have to worry, or be the object of our concern, are doctors and hospitals.