"Compared with plans that would be available in the nongroup market under current law, nongroup policies under the proposal would have lower administrative costs, largely because of the new market rules," notes the CBO. "Administrative costs would be reduced by provisions that require some standardization of benefits -- for example, by limiting variation in the types of policies that could be offered and prohibiting 'riders' to insurance policies (which are amendments to a policy's terms, such as coverage exclusions for preexisting conditions); insurers incur administrative costs to implement those exclusions." (emphasis added)
So by not allowing the health insurers to deny coverage, either through rescission or through not insuring people with pre-existing conditions, the Senate health care reform bill will actually save the insurers money. This situation is similar to when the government increases tax rates, but in reverse; when tax rates are higher, more tax revenues will be received than before. But some of that additional revenue will inevitably be lost through individuals and firms hiring tax lawyers and specialists to find loopholes in the tax laws that they can exploit so as to pay less in taxes than they would otherwise. Thus, the effect of the tax increase on revenues is reduced.
In a similar vein, by disallowing rescission and non-coverage due to pre-existing conditions, the Senate bill will thereby remove the incentive of the insurers to save money through denying care. The denial of care costs the insurers money as they have employees devoted to analyzing health claims for discrepancies that can be used against the policyholders. Imagine if those employees could be employed in jobs where they actually helped make care more efficient, or user-friendly? This small item in the CBO report provides a window into the structurally anti-patient health care system we have in this country.
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