The Impact of Health Insurance Exchanges

Posted on: April 8, 2013

Without Coverage, Access to Quality Healthcare is Extremely Limited

By Joel Seligman, President & CEO, Northern Westchester Hospital

The new Insurance Exchanges that go live January 1, 2014 are critical to achieving the most important benefit of the Affordable Care Act. They are the vehicle to extend health coverage to many millions of uninsured Americans, small businesses and others for whom good health insurance remains a dream. Make no mistake about the importance of being insured – without coverage one’s access to quality healthcare – especially specialty care is extremely limited. At any point during the year as many as 70 million Americans find themselves in this potentially desperate situation. 

It follows that this must be good for our neighbors and good for our communities. By standardizing health plans, eliminating restrictions on pre-existing conditions and providing subsidies and incentives, the Federal Government is enabling millions of uninsured Americans to find coverage that they can afford.

Isn’t this also a good thing for hospitals and physicians?
With a greater number of patients having coverage, won’t doctors and hospitals be in a better financial position? Not necessarily. Depending on how this plays out, the Insurance Exchanges could lead to the downfall of many hospitals, especially those serving the poor, because those hospitals are the most vulnerable economically and politically. 

What, exactly, is the problem for our hospitals and physicians?
The issue relates to how the Insurance Exchange will impact the overall reimbursement picture for hospitals and physicians. For many years now, hospitals have depended on higher commercial insurance rates (which are ultimately paid by employers) to subsidize Medicare and Medicaid rates, which no longer cover the full cost of caring for their patients. There is the potential that the Insurance Exchange will try to drive down payment rates to hospitals to the level of the Medicare and Medicaid rates. If employers decide to stop providing commercial health insurance for their employees, which is a possibility, those employees will end up in this lower reimbursement world of the Exchange. If that happens to a significant degree, hospitals and physicians could find their revenues significantly reduced. Many hospitals, especially in New York State, already live on the brink of financial ruin. Thankfully Northern Westchester Hospital is not one of these. But we have seen many hospitals close in recent years, and this could potentially fuel such downsizing. 

Isn’t downsizing a necessary and good way to reduce the cost of healthcare? 
There is room for significant cost reduction in healthcare, and some of it needs to happen through better hospital capacity planning and collaboration. But this type of “underpayment” could be too dramatic and too quick to allow providers to redesign care delivery systems, for regulators to modernize costly regulations, for our legal system to address unaffordable liability costs, and for biotech and pharmaceutical companies to restructure their pricing to match lower market prices. We need to phase-in these transitions over a 5-10 year period. The urge to just rapidly cut costs in healthcare won’t just cut costs; it will cut access and quality. In the end, the ambitious goals of more access to better quality care may well be undermined by unintended, detrimental consequences.

These are worthy changes which will expand access. But make no mistake; they must be implemented carefully, so that we don’t unintentionally lose hospitals which are critical to the well-being of their communities. Hippocrates said it best…. “First do no harm.”

[View previous NWH blog post:  With Healthcare Reform, Comes Health Insurance Exchanges]