Obamacare Promotes Medlining
What is medlining?
Obamacare is filled with a lot of unintended consequences. One of the newest ones is the concept of medlining. It’s basically health care’s version of redlining.
Most people following the passage and implementation of the ACA are aware that all insurers within the same insurance plan must be charged the same premium regardless of expected health care costs. The term “Community pricing” has been used to describe that concept.
In theory the concept is popular because now people with pre-existing conditions or who have been traditionally in a high risk health group such as the elderly, will now not be charged more than anyone else that I covered under the identical plan.
So far so good…..However, the costs still exist. Elderly people will need more medical attention as a group more than the 20-somethings. The medical insurance companies still will be classifying groups of people as they always have. They are just losing a tool at their disposal which was to charge those most likely to use the insurance more money. The insurance company will have to charge the healthy more money to make up for the people that are less healthy.
The effect will be that insurance companies will profit from healthy enrollees and incur losses on the less healthy. All plans will have a perverse incentive to attract the healthy less costly patients while avoiding the sick and more costly patients.
How will the insurance companies gain a competitive advantage? By medlining! Medlining is the act of over-providing to the healthy while under-providing to the sick. For example it may be common practice to offer health club memberships, dental benefits, and vision care which tend to be popular among a younger and healthier crowd. To offset those increase costs, the insurance company will save money by limiting the number of specialists and services which may be associated with an unhealthy population. Insurance companies may be required to have geriatric doctors in their system by the law but there is no provision of how many of those doctors are required.
So What’s Next?
If you are young healthy person, you will still be paying more on Jan 1, 2014 than you pay on Dec 31, 2013 for health insurance premiums. For that increase in payments, that group will be receiving more benefits associated with their lifestyle.
Less healthy patients will have 2 choices. They will be able to pay the lower amount to be in a insurance program that is less robust in areas they need OR they will have to pay more for a policy that is more appropriate for their needs. Remember, the ACA only states that insurance companies cannot discriminate of price within the same policy. This will be yet another issue that the elderly will have to deal with once Obamacare goes into full effect.
Health insurance companies are not commenting on this. They may not even intend to go down that path. However, they will at some point look at ways to cut costs and/or increase revenues. The most logical way would be to look at what is the high cost factors in your business and try to eliminate them. We can assume that they are or have been reducing internal costs they currently have control over and will look at those that they do not have control over. The question will be….how to control that group they thought they had no control over.