Wednesday, September 22, 2010

Insurance changes could mean higher costs

By Jamey Dunn

Some substantial provisions from the new federal health care reform law go into effect tomorrow, though the bulk of the legislation does not kick in until 2014. One insurance expert believes the changes will result in increased costs.

When asked if consumers will see spikes in their premiums because of the new health insurance provisions, Kevin Martin, executive director of the Illinois Insurance Association, said, “[Prices] have been consistently inching up all along.” He said the cost of insurance may be continually increasing, but it is outpaced by medical costs.

Martin said he sees the merit in arguments that the reforms could bring down costs, such as preventative measures cutting the expense of covering chronic disease. But he said only time well tell if they prove accurate.

He said the bottom line is, if insurance companies are asked to offer more, insurance will be more expensive. “When you increase benefits, it’s got to increase costs.”

Policies written after Thursday will reflect the new law. Martin advises residents with insurance to sit down once a year with their agent and go over their plans. “You always need to kind of look at what you’re paying for and what you’re getting.”

Martin says the industry has been preparing for the new law since it passed in March. “It’s nice that they are staggering the effective dates of the law. But I think every one is kind of holding their breath. … The real effect is going to come in 2014.”

He is skeptical about the new law helping insurance companies improve service to customers while still keeping costs down. “[Insurance companies] have always been kind of the poster child for all these abuses that have supposedly occurred. … Will these reforms actually result in better benefits and less cost? I kind of doubt that.”

U.S. Sen. Richard Durbin has characterized the new regulations as “changes in the law that will affect millions of Americans and bring piece of mind.”

He said that for Illinoisans, one of the most important effects of the new law is that it limits the reasons an insurer can use to rescind a policy. Insurance companies can retroactively cancel policies for up to two years after their creation if they find mistakes or inaccuracies on applications. Durbin said Illinois has the most rescissions in the country, with 5,632 residents losing their coverage between 2004 and 2008. He accused companies of poring over applications for mistakes after a client becomes ill and needs insurance coverage.

He called that practice “scandalous” and added, “Tomorrow it will be not only scandalous but illegal.”

After Thursday, insurers will not be able to rescind policies unless customers commit intentional fraud or misrepresentation on their applications.

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