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Effects of Healthcare Reforms on an Insurance Industry

Outline

I. Introduction

          a. Brief review of the concept of healthcare reform

          b. A thesis statement

II. Effects of healthcare reforms on an insurance industry

          a. Reduces company’s profit margins

          b. Reduces company’s  administrative costs

III. Conclusion

IV. Works Cited

Healthcare reform affects patients, healthcare providers, government spending and biomedical researchers. A good healthcare reform should be cost effective in its implementations and affordability. In my view, any reform in the healthcare sector should be that, which widens the population that receives insurance coverage, diversifies and minimizes the cost of healthcare, protect the right patients and physicians as well as improves accessibility and quality in order to eliminate strikes of healthcare givers and suffering of patients. Although healthcare reforms should aim at fairness and sustainability, high costs of medical coverage and economic impacts on insurance companies are the major effects of healthcare reforms.

Healthcare reforms have affected the profit margins, administrative costs, membership growth and medical management and expenses of insurance companies. The attempt by the insurance companies to strive to remain relevant in the business by providing adequately medical coverage only results to a lot of risk and adverse selection. In this case, majority of the members covered under the insurance scheme are sick, making the companies to pay out medical expenses exorbitantly. Thus reduces the entire profit margin of the companies. In fact, according to Moffatt, the efforts to minimize the risks through provisional exclusion and lifetime benefits only compel the companies to incur more risks. Ideally, since majority of the insurance takers are sick people, adverse selection can easily kill an insurance company.

Since healthcare reforms require the companies to spend a lot of revenue on health care claims, the insurance companies tries to maximize the profit by reducing administrative expenses. However, spending less on administration guarantees neither more profit nor large networks. Generally, the existence of large networks creates difficulty in controlling the costs in the new market besides the higher costs of premium involved. In addition, the government regulations make it cumbersome for a company to differentiate itself by making more profit and to control costs by making less profits. It is worth noting that reducing administrative expenses leads to reduction in the number of the staff and hence joblessness and smaller networks due to less choice membership.

In conclusion, albeit the remedy of limiting market by making many young and healthy persons take the plan increases the company’s profit, it brings inequity in medical coverage. Therefore, to match competition and to hide by healthcare reforms processes, companies have changed their recruitment, production and management systems.



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