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Effects of Healthcare Reforms on Insurance Industry

The annual cost of health care a decade ago was about $7,026 per person (Delaney, 2015). Over the years, there has been a constant surge in the healthcare cost by an annual rate of 13.4% making more than 20% of American incapable of affording quality medical services. As a result, the recent governments have tried their best to implement policies and programs that can improve the 1965 Medicare and Medicaid strategy so that every American citizen can get access to quality medical care. March 23, 2010, became the start of a historical step towards improving the quality of health care in the country after Obama signed into law the Patient Protection and Affordable Care Act (ACA) (Dawes & Satcher, 2016). The ACA has so far remodeled the healthcare system and significantly affected the operations in the insurance industry. In this context, the paper analyzes how health reforms in the country have tweaked the use of health insurance premiums and increased in the number of Americans with health insurance coverage.

The immediate impact of the ACA on the insurance industry was adjusting how the insurance companies utilize the premiums they collect from their consumers. Insurance companies, under the ACA, are required by the law to spend a more sigrnificant fraction of their premium income on health care delivery rather than on administrative, profits and salary expenses. According to Obama (2016), ACA’s medical loss ratio directs that at least 85% of the premiums, paid to the insurance companies by large employers, be spent on improving medical care delivery in the country. Furthermore, any insurance company that ends up spending more on activities other than medical care are mandated to issue rebates to its consumer during summer. Dawes & Satcher (2016) state that insurance companies, in the year 2012, issued up to $1.1 billion deductions to approximately 12.8 million customers with each household getting an average of $151. As a result, the cost of premiums reduced significantly allowing low-income families and small businesses to get better health care services at a reduced price. 

Moreover, the ACA act has significantly increased the number of Americans covered by medical insurance without jeopardizing the insurance policies. Currently, it does not matter if one has procured health insurance individually or through the employer. The implementation of the ACA outlawed any restrictions that barred people without health insurance from getting quality healthcare. Before enacting ACA, 1 out of 7 consumers in the country were being denied health insurance coverage every day due to pre-existing conditions such as faults in their application forms (Obama, 2016). Currently, ACA restricts the insurance companies from exercising rescission when a customer urgently needs their medical insurance coverage. Also, tax credits have made it easier for everyone including low-income families to afford health insurance cover (Jung & Tran, 2016). As a result, more Americans now have access to proper and quality medical care treatment in both private and government medical facilities.

In summary, the healthcare reforms have shifted the benefits on insurance premium from insurance companies to consumers and opened doors for Americans from all social backgrounds to have health insurance coverage. ACA act has made insurance companies expend more on improving the quality of medical care in the country at the expense of the insurance companies salaries and bonuses. Besides, sanctioning the ACA act has eliminated policies that limited consumers from using their insurance coverage due to minor errors. Hence, in addition to lessening the insurance cost through tax credits, more Americans have been able to purchase health insurance cover and access quality health care.

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