Health Insurance Articles
How Recent Health Care Reform Laws Will Impact Existing Policyholders
2011-09-03
The new health insurance laws introduced by the Obama administration such as the Affordable Care Act will have an enormous effect on how health insurance coverage is purchased and used in the United States. For instance, much has been made of the so-called "insurance mandate" in the Affordable Care Act. The mandate taxes Americans who don't buy health insurance, and the mandate has both its ardent supporters and detractors. However, while the insurance mandate is certainly important, other aspects of the new health reform laws will have more of a direct impact on existing policyholders who have had their insurance policies for some time.
In the past, health insurance companies could avoid a payout or cancel a policy due to minor mistakes on a policy holder's initial application. This tactic is known as rescission and has been greatly curtailed by new health reform laws. In fact, rescission has been effectively eliminated as a cost-saving tactic for insurance companies, as policies can only be rescinded if the applicants knowingly left out vital information about preexisting conditions. If a policy holder simply missed an address or misprinted his or her age, the policy can't be retroactively canceled and claims can't be denied. This protects the insured by making health insurance coverage more reliable, and existing policyholders probably benefit the most from the new rescission laws.
Policyholders also benefit from new reviews put in place by the Affordable Care Act that will require health insurance companies to use consistent methods when pricing policies. Changes in health insurance rates will now need to be reviewed, and the AFA has greatly strengthened insurance commissioners' roles in preventing overpriced policies. Hefty rate hikes will be less common thanks to the new health reform laws and must be justified. Another provision of the AFA compels health insurance companies to use an established percentage of buyers' health insurance premiums directly on medical care, and when that percentage limit hasn't been met, insurers will have to issue rebates to buyers. This can also be beneficial to existing policyholders and also serves to lower the total cost of insurance.
Ultimately, the protection afforded by new health reform laws is significant and helps to ensure that buyers' insurance coverage works as expected. Opponents of the legislation have argued that these reforms will drive up the already-high cost of health insurance coverage, but supporters argue the exact opposite and the truth remains to be seen. In any case, existing policyholders are certainly as affected by new health care laws as any Americans and should closely evaluate their policies to understand how all of the changes will affect them.
