Health Care Reform Bill: How It Affects You

by Silicon Valley Blogger on 2010-03-2426

I discuss the much anticipated health care reform bill and its effects on the health care industry, on health insurance and on all of us hapless consumers.

Here’s what we were all clamoring for, but is it what you expected or what you wanted it to be? Personally, I was eager to see some reforms done in the health care area. We all want lower health care costs for everybody but what can we really expect from the new health care reform bill?

My main beef is about all the medical waste we’re seeing at hospitals when they’d charge you ridiculous amounts for small items such as $140 tylenol pills and $1,000 tooth brushes, which would consistently slip through the cracks whether they’re deemed errors or not. These get paid for by our insurance companies and well, that’s where a lot of the bloat comes from.

I was expecting health care reform in terms of better checks and balances covering the health insurance industry and the medical industry… instead we get this: consumers get slammed. Or let me rephrase it — certain consumers get slammed and many others benefit. I’m wondering why consumers have to pay for these discrepancies in the first place. Can’t we just fix what’s going on in the insurance world or get some transparency in the medical community? But wait, that’s wishful thinking — regular consumers don’t necessarily have lobbyists and deep pockets on their side.

Health Care Reform Bill: How It Affects You

At any rate, here’s a look at the Health Reform Bill that became law:

So as the video shows, there are those who benefit from the bill and those who don’t (or are these euphemistic terms for “winners” and “losers”?). And here are some personal thoughts about this from my end:

The health care reform bill has highly anticipated benefits.

Hey this is great. If you are unemployed and have no way to get insurance, well this bill will cover you. And if you’ve got preexisting conditions, then that’s awesome — you’ll now be in better hands. Sooner or later, we’ll all find ourselves with a preexisting condition anyway, so shouldn’t this be a good thing? There’s a wait though, as this part of the bill will be made effective in 2014.

There are also quite a number of criticisms.

1. More Taxes
If you’re well off, well there are more taxes coming your way by 2013. They had to hit someone for these taxes, right? Anyway, taxes are going up — namely, 4% of income on investments including the sale of your home (unearned income). There’s also a planned personal income tax increase of 1% (earned income) if you make $350,000 or higher. Behold another example of legal wealth transfer.

2. Less Innovation = Shorter Life Spans?
With the government becoming more involved in our health care, could there be effects on the progress on medical innovation? The thing is, when the government steps into the picture, they’re generally recognized as a demotivating influence. Could we end up paying for a shorter life expectancy due to any kind of slowdown in medical innovation, especially if researchers lose the financial motivation to innovate?

3. The Case for “Adverse Selection”
And finally, for those who are healthy and who carry their own health insurance: could this health care bill give you a huge disincentive to buy health insurance? Some reasons why that could be the case given the passage of this bill:

(a) You can think about deferring the purchase of an insurance policy if you are generally healthy. Why? Because you can always get a policy anytime even if you develop a preexisting condition (but don’t jump the gun because this comes into effect in 2014). Previously, people felt the need to carry insurance to ensure that they were covered if they ever do develop a chronic sickness. Without the bill, anyone with a preexisting condition could not qualify for insurance coverage.
(b) While there’s a penalty for not carrying insurance, it’s really not that large — it’s around $2,000 (again, this will be effective in 2014).

If you aren’t an employee with health benefits but are someone who is fairly healthy and who doesn’t need to visit the doctor that often, then you may get away with saving money by just skipping out on health insurance altogether. If you’re in this boat and you’re typically self-insured, you may think that the best strategy for saving on insurance in the long run is to finally go without coverage. And if the government ever catches you — since insurance will eventually be mandatory by law — then simply pay the $2,000 penalty, which you can expect to be cheaper than the premiums you’d pay over a long period of time. This way, you can wait to get coverage until you absolutely need it.

But while this situation may be financially beneficial for the healthy individual consumer, it’s really bad for society as a whole. Here’s why: this scenario is called “Adverse Selection”, which means that only people who are the most expensive to insure will be compelled to get insurance. Unfortunately, the health care reform bill does not support a well designed insurance market due to the effects of Adverse Selection. A good plan would motivate anyone to get insurance (whether they’re healthy or not) such that the costs of insurance are spread across the whole population.

The consequence of Adverse Selection is that the cost of insurance will increase because the available pool of insured customers will shrink. What we want is an affordable insurance system that is made available to everyone, and for the costs of insurance to be spread around more equitably. This can be achieved by making the government penalty of NOT carrying insurance much higher than what it is now.

So what do you think of these new developments?

For other reads on the subject of health care and medical issues, try:

Copyright © 2010 The Digerati Life. All Rights Reserved.

{ 26 comments… read them below or add one }

The Biz of Life March 25, 2010 at 3:58 am

This bill is not what I was clamoring for. It is nothing short of God-awful, and most will regret it was ever passed. Read the stinging criticism of the bill by Obama’s second cousin at

For me personally, it means higher taxes, higher premiums, and lower coverage than what I have today– along with the very real possibility my employer could elect to save money, pay the fine instead of the insurance premium, and dump all their employees and retirees onto the government plan. Anyone who earns a decent living or has any wealth should get ready to pay more in taxes. The unintended consequences of all this social engineering are going to be very costly, and there aren’t enough rich people in the country to fund all the pipe dreams.

WPBonds March 25, 2010 at 7:17 am

The old system is based on capitalism and insurance; because of this it becomes slightly exclusive. If you look at the numbers, for the old system to work, the insurance companies have to reject a certain number of people, leaving them to die. It worked kind of like college, to remain prestigious, they have to turn away some people.

Silicon Valley Blogger March 25, 2010 at 7:26 am

My concern here is that here’s yet another plan that is hitting the consumers again. Why doesn’t the government take a hard look at the medical system and check out the efficiencies there. There’s so much waste that has been reported in hospitals, with the bureaucracy and disorganization rampant. The relationship between hospitals and insurance agents and drug companies… there’s a lot of things that can be looked into here and I suspect that can be made cheaper or more streamlined to really produce savings. Billing mistakes are a HUGE thing that go unnoticed and this causes so much of that waste that changes hands. All these is just eventually passed on to the consumers and that’s why things escalate in expense.

Is there any promise here to review the existing systems we have in place? Or are they just going down the path of least resistance to seek out their #1 source of bailout money — the taxpayers? To me, this is where the failure is. Will this plan include a regulatory body that checks out what’s going on under the covers with insurance companies, big pharmacological companies, and hospitals?

jes March 25, 2010 at 8:41 am

So far the impact of the bill on my life is a 25 percent increase in insurance premiums, forcing me to a huge deductible. If I get really sick, I’d better just die. A provision I only saw listed in one place and am not sure about: a limit of $2,500 a year for flexplans that allow you to pay medical costs with pretax dollars — that’s not half enough to cover my insurance premiums.

This whole thing is a scam and I’m profoundly disappointed in Obama, for whom I actually had hopes. I’ll be retiring in about 4-5 years and something that has floated in the back in my brain for some time is rapidly becoming a firm intention — I’ll move to another country. My research (admittedly not in much depth so far) indicates that are are many countries where health care costs (as well as the cost of living in general) are within reason. All my life, I’ve been politically engaged and unfashionably patriotic (which to me, means loving my country if not my government). That’s over now, and for me that is perhaps is the saddest and most devastating impact of all.

Ryan@TheFinancialStudent March 25, 2010 at 10:00 am

I agree that cost has got to be addressed. I would venture that’s something else that will have to be done. But I think the smoke needs to clear before that gets tackled, because some people against this law are losing it. Threats, bricks thrown through windows, gas lines cut, etc.

Just a side note: insurance premiums were going to get rising regardless of this legislation, so I don’t think that’s a good argument against it.

Credit Girl March 25, 2010 at 1:49 pm

The health care bill doesn’t even go into effect until 2014 correct? The positive thing that I like about the health care bill is the fact that insurance premiums should be cheaper since everyone is practically being forced to buy health insurance. The downside, however, is that many people will feel violated because they are being “forced” to buy insurance and that is unfair for certain people who don’t feel that they need it. There are pros and cons to everything so it’s kind of important to see where you fit into the picture.

Pete March 25, 2010 at 1:51 pm

I will be totally surprised if the law stays unchanged long enough for most of these provisions to actually come into effect in two or three years. Or maybe I’m just trying to stay hopeful.

And yes, like you, I think what we need is cost reform, not just insurance reform. Lowering the cost of medical services would do more to bring down insurance premiums than anything else, and lower premiums would mean more people will be able to afford insurance.

For a start, I’d like to see something like workers compensation, where there’s a limitation on patients suing doctors, like there’s a limitation on employees suing employers, which would decrease doctors’ and hospitals’ malpractice insurance and therefore lower one cost of healthcare.

Matt March 25, 2010 at 2:58 pm

This so called health care reform brings much more negative things than positive ones. IMHO.

John March 25, 2010 at 3:39 pm

This is so dumb everyone wanted a healthcare bill but when we get it, it’s not what everyone wanted it to be!!! Man the government is all jacked up…..

Shaun McGowan March 25, 2010 at 4:32 pm

Over the next few months you will most likely receive information in the mail from your health insurance company about how the newly signed law will affect your coverage. Read the correspondence carefully and don’t hesitate to ask questions about your policy; there may be new, more affordable options for you down the road.

Silicon Valley Blogger March 25, 2010 at 5:03 pm

A lot of people aren’t too happy about this development, that’s for sure. Big changes are never easy.

Green March 25, 2010 at 5:15 pm

I think that you have one of the better sites in your niche and I check back often for new updates, best of luck with the site.

Jen March 26, 2010 at 3:28 am

Thanks for such a nice post !
Medical bills are a major financial concern for general people. To have control over these, are the medicare guides that available on the Internet are very helpful. They really provide enough information to find a permanent solution to deal with your expensive medical bill.

Rick @ Private Label Rights Ebook Store March 26, 2010 at 6:32 am

With this bill I think the government is heading into uncharted waters with a huge risk of sinking. The concern I have is the government is dragging everyone along for the ride, and I don’t think the Arc will stay afloat too long.

Paul Mansfield March 27, 2010 at 6:04 am

I’m a little unsure there has been much research into point 2. Less Innovation = Shorter Life Spans, even the CIA world Fact Book shows that life expectancy in the evil Government lead health care system in the UK has a higher life expectancy than the US, 49th to 36th.
Looking outside life expectancy, the picture is more mixed. HIV/AIDS, higher in the US, Infant mortality, higher in the UK. Let’s not allow research and statistics to get in the way of politics.

Chat Munninger March 29, 2010 at 1:19 am

Taxpayers always cry about having to pay more taxes when the government decides to take that money for the benevit of the poorer people. I think if we imagine there is a person we love who can not efford health care but is in a serious medical condition then it is a great thing that there is help. I am from Germany and we have an obligatory health insurance. And I think hardly any German thinks it is unfair that the rich to some extend have to come up for the health of the poor. This is the way it should be.

What I find unfair though, is that for example a person that smoked cigarette all his/ her life needs so much money for treatment when they get cancer some day and everybody has to pay for that. Because that is just their own fault. Perhaps cigarettes should just go up in prices by 200%. Because by slowly rising the costs everybody keeps buying. But that’s another topic.

StL reflections April 2, 2010 at 11:17 pm

On the two points about cost and adverse selection: 1) I do note that the bill has a lot of things that may reduce costs at hospitals-there are pilot programs to increase electronic records, to pay hospitals and doctors based on the health of the patient, rather than on services provided (e.g., no more 1000$ toothbrushes), and a medicare commission that has a huge amount of power to find places to cut costs, and I’m very excited about the exchanges-one place to buy health insurance with prices outlined clearly will give the market a chance to actually work. I’m willing to believe the Congressional Budget Office’s numbers.

On Adverse selection, I think there is some adverse selection danger, but with smaller fines, there has been no problem around this in Massachusetts which has a largely identical plan already, and it would be very easy for congress to up the penalty if too many people just pay the fine.

While the bill is certainly not perfect, I think its a lot better than the current situation, and I have high hopes of it slowing the cost expansion of medical care.

Joe April 3, 2010 at 8:12 pm

My solution to health-care reverts back to nature’s healing properties that will help us live longer, feel better, look better and will keep us out of hospitals.

Robert April 4, 2010 at 2:48 pm

Europeans and Canadians all have better health care than we do. I don’t understand why people are so angry about this law. Parents will be able to keep their kids on their insurance when their kids go off to college and millions of people who didn’t have health insurance will now be covered. Not to mention it’s closing the doughnut hole in Medicare D that leaves many seniors unable to pay for their prescriptions.

If the United States can spend billions of dollars killing people in the Middle East then they can surely afford to help people here. Period.

chat April 14, 2010 at 3:57 am

I absolutely agree with you Robert. If one takes a closer look at the majority of people opposing the new US health care plan one will see a fairly rich bunch of people too selfish to allow poor people the health they deserve. The thought honestly makes me sick. And I think the whole discussion reveals a very dark side of the American society.

Carlos Diez May 13, 2010 at 4:51 pm

I have been in health insurance for many years and let me tell you, so far the big major medical carriers are responding by phasing out of writing major medical coverage because they are being forced to raise their reserve requirement to 80 percent. They will also begin lowering commissions drastically on september 1 2010. This will create a lot of unemployment for insurance professionals and leave us the consumer out in the dark again by not having access and still paying for the bill with our tax money. I wrote an article about the major problem, and it has a lot to do with just the cost of receiving health care. I agree that something has to be done but they are going in the wrong direction, here’s the article for anyone who is interested.

Miss Platnum May 30, 2010 at 2:44 am

I agree with Joe. Although maybe the reason for agreeing with him is that I have never been sick. Hope i will be able to maintain my health for as long as possible…

Paul@footbathdetox August 12, 2010 at 9:15 am

I totally agree with Pete on this one. Lowering the premiums would help out a lot. The bottom line is that the government needs to quit taking from those that work hard and giving it to the people who are not contributing.

Kenneth Ford September 20, 2010 at 1:03 pm

I think you have identified most of the issues with the reform, I would add, with an educated degree of expertise, that should the current reform be realized in 2014 unchanged, that there will also be much higher premiums, and a limited number of companies willing to remain in the market place. These issues would lead to the control of the industry by the fed, and the Democrats ultimate goal, Universal health care, with rationing and a huge expansion of the federal budget. Health care is over 20% of our GNP, and the government has made a better effort of no category of business it is involved in. Thanks for the post.

Carolyn January 5, 2011 at 7:15 pm

Hey Chat – You hit the nail on the head. The only ones that appear to be affected in a negative way are the ultra wealthy who can afford the best tax attorneys and accountants to figure out how to make the less wealthy pay for more BMW’s and Yachts. I too see the dark side to this American Dream. So many of them cry out that it is unconstitutional to make everyone take out health insurance. Well, isn’t it in the same category of making everyone pay taxes? You can’t have your cake and eat it too. If we want social services, if we want a healthier nation for everyone. We must pay taxes and we must have everyone insured.

JEC September 7, 2012 at 9:02 pm

This entire blog is horribly retarded. Next time don’t even bother trying to paraphrase republican and healthcare lobbyist talking points and claim they were your own. Just cut and paste them and admit that you are a lemming.

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