US HealthCare Reform’s Effect on the US Medical Tourism Marketplace
Updated & Released July 9, 2012
The United States has been in a healthcare crisis for years. It is estimated that more than 50 million Americans and growing are without health insurance and over 120 million are without dental insurance. A common misperception is that the average American without health insurance does not have the financial means to purchase health insurance, but it is estimated the average American without health insurance makes approximately $50,000 dollars per year. Those Americans who do not have the financial means to purchase health insurance are typically provided coverage, called Medicaid, by the state and federal government. The definition of an uninsured American varies and has become a political debate as different political parties argue different definitions and numbers.
At the end of March 2010, the Patient Protection and Affordable Care Act (PPACA) and the reconciliation bill were passed into law. US Healthcare Reform should have a very positive impact on the growth of outbound medical tourism leaving the United States while having no impact on the continued growth of both foreign patients coming into the US for healthcare treatment (inbound medical tourism), or on American healthcare consumers who travel regionally throughout the US for healthcare treatment (Domestic medical tourism).
Healthcare Reform will most likely drive up the costs of health insurance in the US to an unsustainable level. It is estimated that in 2020, health insurance costs for a family could range from $30,000 to $40,000 per year. Under Healthcare Reform, these health insurance costs should be higher. While Healthcare Reform’s intention is to insure more Americans, it may have the opposite effect of creating more uninsured due to high health insurance costs. Healthcare Reform is pushing more employers, insurers and health insurance agents to examine implementing medical tourism. With health insurance and healthcare costs in the US rising at a much faster pace under Healthcare Reform, the medical tourism industry is expected to see growth in 2013 and very strong growth occurring in 2014, as the major parts and mandates of Healthcare Reform are implemented and health insurance cost increases are felt more clearly.
The passage of Healthcare Reform has made sweeping changes and has changed healthcare as we know it in America. Very few people in the US, including government officials, employers and insurance companies, understand its true impact or have even read the entire Healthcare Reform legislation. Unfortunately, even after reading the Healthcare Reform bill, there are many unanswered questions because the bill creates new governmental entities whose duties will be to create new regulations, rules and guidelines of how Healthcare Reform will work and what the actual defined benefit levels will be. It will take several years for industry participants to fully understand the full effect Healthcare Reform will have on their business.
To complicate the matter of the lack of understanding of Healthcare Reform’s true effect, one must understand the law, and the cost of understanding and complying with the law and the layers of government involvement within it. The Healthcare Reform Law is almost 3,000 pages, and there are almost 13,000 pages of regulations. In drafting regulations and interpretations the IRS, Health and Human Services, and many other agencies have not really even gotten started yet on creating those regulations, rules and interpretations. There are approximately 180 government committees, bureaus, commissions, boards, within the different agencies involved in providing the rules, regulations, interpretations and enforcement of the law. One can only imagine how many years and the amount of analysis and education it will take for employers, insurance companies and individual healthcare consumers to fully understand the law and its impact.
Healthcare Reform did not create a public option or a government plan, so the insurance marketplace will still be run by private industry, specifically the fully insured and self-funded health plans. Some of the major changes in Healthcare Reform will be the waiving of pre-existing conditions, the elimination of annual and lifetime limits, the expanding of dependant coverage to age 26 (Caterpillar Inc, when the law was first passed in 2010, estimated that expanding the dependant age to 26 will cost the company $20 million per year more), providing level or equal premiums for those who are sick or healthy, the creation of “essential benefits,” the creation of health insurance exchanges (where Americans can purchase health insurance) and mandating the purchase of health insurance by Americans or a penalty must be paid. Healthcare Reform also lowers the insurance premiums for elderly Americans artificially and raises it for younger Americans, specifically at a three to one ratio, where elderly Americans cannot be charged more than 3 times that of a younger American even though actuarially they should be charged five to six times the price of a younger American.
Healthcare Reform required that preventative services be included for newly enrolled insured plans by the fall of 2010 or within six months of enactment of the bill for existing health insurance plans. Specifically, the following benefits must be included:
- Evidence-based items or services with a rating of ‘A’ or ‘B’ in the current recommendations of the United States Preventive Services Task Force;
- Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved;
- For infants, children and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration;
- For women, additional preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration;
- For women, the recommendations issued by the United States Preventive Service Task Force regarding breast cancer screening, mammography and prevention shall be considered the most current other than those issued in or around November 2009.
For those qualified health plans that will be required to provide this preventative coverage without cost-sharing for preventive services that are rated ‘A’ or ‘B’ by the U.S. Preventive Services Task Force, these services could be recommended immunizations, preventive care for infants, children and adolescents and additional preventive care and screenings for women.
The waiving of pre-existing conditions will have both positive and negative effects on the health insurance industry. The waiving of pre-existing conditions clauses, which started in 2010 for children and will begin in 2014 for adults, will drive up the costs of health insurance in the US. For those who are sick and have health conditions this can be a positive step forward, because there are many Americans who were previously denied health insurance because of a pre-existing condition or who could not afford to purchase health insurance because of the high premiums. For many of these Americans that health insurance and health care were inaccessible for, they could not afford to receive the proper medical care, which resulted in the worsening of their health conditions and, later in life, much higher medical expenses. Also, many of these Americans did not have access to preventative services to catch serious health conditions at an early stage, due to lack of access to proper or affordable health care. For these Americans, the waiving of the pre-existing conditions clauses and the lowering of health insurance premiums, which will be subsidized by healthy Americans that will have their insurance rates increased, will provide them access to more affordable healthcare for the first time.
Unfortunately there are also some negative side effects to this. Even though pre-existing conditions clauses will be waived starting in 2014, with the costs of a family health insurance plan rising to $30,000 to $40,000 a year by 2020 or earlier, many of these sick Americans with pre-existing conditions may not be able to afford to pay the health insurance premiums. Also, insurance premiums for individuals who are healthy will increase in order to subsidize sicker Americans who have pre-existing conditions. This is because the law requires healthy and sick people to pay the same health insurance premiums. The only variations allowed in the charging of health insurance premiums are for age, tobacco use and geographic location.
Healthcare Reform does not properly incentivize Americans to purchase health insurance. The fines for not purchasing health insurance in 2014 start at $95, and increase each year. Compared to rising health insurance costs in the next 10 years, the fines, which were originally meant to force the majority of Americans to buy health insurance, are small and will fall short of their intended goal. This would mean many Americans can make the decision to not purchase health insurance, not engage in healthy lifestyles or behaviors or focus on preventative medicine and instead wait until they are sick and then purchase guaranteed-issue health insurance with no pre-existing conditions clauses at a “fair price subsidized by the healthy.” This penalizes Americans who have engaged in healthy behavior and lifestyles and who have planned and paid for health insurance every month in anticipation of one day possibly becoming ill or sick. People who have always paid for health insurance and maintained a healthy lifestyle are in actuality being penalized in the form of their health insurance premiums increasing. An example of this is as follows:
In 2014, Joe, who is 45 and whose health insurance costs $1,200 a month makes a decision to not pay for health insurance and instead to pay the $95 fine for the year. He chooses not to buy health insurance because he knows when he does get sick with a major health condition he can purchase health insurance at any time and immediately be covered. Joe smokes a pack of cigarettes per day, drinks alcohol each day, eats fast food for meals and does not exercise.
Jane is 45, healthy and her health insurance costs in 2014 would be $1,200 a month. She pays her premiums each month. She exercises five times per week, eats healthy food and does not drink or smoke. Under Healthcare Reform, Jane and Joe’s health insurance premiums must cost the same. Joe will eventually develop serious health conditions because of his lifestyle and when he buys health insurance later in life it will automatically cover everything at the same price as Jane. Starting in 2014, Jane’s insurance premiums will have to increase significantly for the eventuality and potential of people like Joe waiting until they are very sick and need health insurance to purchase it.
The rise of health insurance premiums will have a very positive effect on the medical tourism industry. Because of the potential for skyrocketing health insurance costs, many employers and insurance companies will start to implement medical tourism as one of the only means to lower healthcare costs. The waiving of pre-existing conditions and requiring sick and healthy Americans to pay the same price for health insurance destroys the underwriting process and can put an employer or insurance company in a difficult position of potentially losing a significant amount of money, meaning medical claims incurred by the insurance carrier or employer exceed insurance premiums collected. Medical tourism provides a “hedge”/protection against this because if an insured utilizes the medical tourism benefit it will lower medical claims costs.
More Covered Americans or More Uninsured
The White House believes up to 32 million more Americans may become insured under Healthcare Reform specifically because they believe health insurance premiums will be affordable and the individual mandate and fines for not purchasing health insurance will force Americans to purchase health insurance rather than pay the fine. While this may occur, there are some who believe that the opposite may actually happen and there may be more uninsured Americans under Healthcare Reform. This is because the individual mandate and fines do not go far enough to encourage people to purchase health insurance. In 2014, the fine for an individual is $95 or $7.92 per month for not purchasing health insurance. In 2015 it becomes $325, in 2016, $695. The maximum fine for a family is $2,085 in 2016. After 2016, it increases by a cost of living adjustment. The children’s penalty is half that of the adult. For a young female (age 25-29) who is healthy and feels she doesn’t need insurance or can’t afford the monthly premium of $550, she will simply opt to pay the $7.92 per month penalty (around the cost of one hour of minimum wage per month in the US).
In 2020, a mere eight years away, if the cost for health insurance is estimated to be between $30,000 to $40,000 per year for a family, with the average family annual income being approximately $56,000 per year, the average American will not be able to afford health insurance. Also in 2018, the “Cadillac” tax, which places a tax on high premium health insurance plans, starts. It places an extra 40 percent tax on health insurance plans where the individual premium is higher than $10,200 and $27,500 for a family. Unfortunately, by 2017 it is estimated that most Americans, because of rising health insurance premiums, will fall under this “Cadillac” tax increasing their plan costs by another 40 percent. In 2016 paying a $2,085 fine for the year for a family, $173.50 a month, may seem very attractive versus paying $2,500 a month or more in health insurance premiums for a major medical health insurance plan. Verizon estimates that the Cadillac tax will cost its employees $255 million a year.
More Uninsured Already in 2010 Due to Healthcare Reform
Annual and lifetime limits are prohibited starting Sept. 23, 2010. This negatively affected millions of Americans who lost their health insurance. Certain types of limited medical plans have had to stop offering their limited health plan coverage and this also affects individuals who have purchased short-term medical plans. It also affected affordable major medical plans that had caps on annual and lifetime limits, which were eliminated. Several health insurance carriers have already ceased offering certain types of health insurance plans or announced the end of certain types of health insurance plans. Since the law went into effect in 2010 no one has even reported what happened to the millions of Americans who couldn’t afford comprehensive major medical coverage and who were on these plans. These Americans cannot afford comprehensive major medical insurance and potentially have been “disenfranchised” and will continue to be unable to purchase health insurance in the future because of the costs. For them health insurance may be unattainable. These millions of Americans may be a good market for medical tourism.
The US has a severe doctor shortage and the Association of American Medical Colleges estimates that in the next 15 years there may be a shortage of as many as 150,000 doctors in the U.S. This doctor shortage can become even worse if an estimated 30 million more Americans choose to buy health insurance under Healthcare Reform. Healthcare Reform is attempting to address this by trying to increase the number of doctors and health care professionals in the industry, including provisions to improve the health care workforce education and training and offering support to the existing health care workforce to improve access and delivery of health services to the people. The Healthcare Reform Bill also creates a loan repayment program for the public health workforce to help expand the existing public health fellowship programs and to establish a youth public health program; but all of this doesn’t go far enough to reduce the doctor shortage and Healthcare Reform may only worsen it. Doctor shortages will result in longer queues and waiting times for patients to see doctors and have surgeries performed, which may result in patients traveling overseas for faster access to medical care.
Younger Americans health insurance costs will increase under Healthcare Reform. Older Americans should be charged between five to six times the amount of a younger person, (5:1 or 6:1). Healthcare Reform artificially changed this underwriting to 3:1, which means that older Americans health insurance costs will be cut in half while younger Americans’ insurance rates may almost double to subsidize older Americans. This could cause many young Americans to go without purchasing health insurance because of the increased cost of health insurance. Healthcare Reform also included a special exception for young people, called the “young invincible” plan for younger Americans who are under 30 years old which allows them to purchase a catastrophic-only high deductible health plan. Purchasers of the young invincible plan will be a perfect target for the integration of medical tourism and the waiving of deductibles, coinsurance and out-of-pocket expenses if these policyholders travel internationally for their medical care.
Baby Boomers Crisis
The US is also facing a crisis in healthcare with Baby Boomers, Americans born during the post World War II baby boom. These Americans are aging fast and will overburden and strain the American healthcare system, and exacerbate the doctor shortage issue. The number of Americans aged 65 or over will double by 2050, the number of people age 85 or over will quadruple by 2050, and by 2030 over half of U.S. adults will be over age 50. The over-65 population will nearly triple as a result of the aging Boomers, and more than six of every 10 Boomers will be managing more than one chronic condition. More than one out of every three Boomers – over 21 million – will be considered obese, and one out of every four Boomers – 14 million – will be living with diabetes. Nearly one out of every two Boomers – more than 26 million – will be living with arthritis, and eight times more knee replacements will be performed in 2030 than today. Sixty-two percent of 50-64 year olds reported they had at least six chronic conditions (hypertension, high cholesterol, arthritis, diabetes, heart disease and cancer). As Boomers age, this number will grow from almost 8.6 million today (about one out of every 10 Boomers) to almost 37 million in 2030. By 2030, there will be nearly twice as many adult physician visits as there were in 2004, and Boomers will account for more than four of every 10 of these visits. By 2030, if all Boomers with diabetes receive recommended care, they will need 55 million lab tests per year – 44 million more than today. Physician office visits will number more than one billion by 2020. Four out of 10 office visits will be Boomers. The increase in longevity of Boomers – on top of advances in medications, less invasive treatments and diagnostic testing – will greatly increase the demand for cardiology.
Reference-Source: A joint report from First Consulting Group and the American Hospital Association, titled “When I'm 64: How Boomers Will Change Health Care.”
Medical Malpractice and Defensive Medicine
Healthcare Reform did not provide reform of medical malpractice, which is a large contributor to the costs of healthcare. A 2009 Jackson Healthcare and Gallup Poll of physicians found that one in four dollars spent on health care in the United States is for unnecessary tests and treatments to protect physicians from being sued, a practice known as “defensive medicine.” Ninety-two percent of physicians admitted to practicing defensive medicine. Seventy-three percent of physicians admitted to practicing defensive medicine in the past 12 months to prevent lawsuits. The survey also found that eighty-three percent of younger physicians are taught how to practice defensive medicine in medical school or their residency. The survey found the practice of defensive medicine is growing each year.
Physicians who reported practicing defensive medicine estimated the following:
- 35 percent of diagnostic tests were ordered to avoid lawsuits
- 29 percent of lab tests were ordered to avoid lawsuits
- 19 percent of hospitalizations were ordered to avoid lawsuits
- 14 percent of prescriptions were ordered to avoid lawsuits
- 8 percent of surgeries were performed to avoid lawsuits
The findings of the survey were that potentially $650 to $850 billion in health care costs in the US each year are due to defensive medicine. There is clearly a large amount of healthcare costs in the US due to defensive medicine and medical malpractice, and without meaningful tort reform within Healthcare Reform to limit these costs in the US, they will only continue to increase.
Cost for Employers
Healthcare Reform increases the cost for employers offering health insurance to their employees. Several large employers announced the change in tax consequences will cost them significantly. Caterpillar estimated that in the first year alone Healthcare Reform will cost the company $100 million dollars. In May 2010, Fortune Magazine reported that several large employers are considering dropping their employer-sponsored health insurance because of the increased costs under Healthcare Reform and paying the fine for not providing health insurance. AT&T, Deere, Verizon and Caterpillar were among these employers. Senator Waxman called for hearings before Congress over the allegations and subpoenaed records from these companies as to any proof they had prepared and what they felt the cost of Healthcare Reform would cost them. After receiving the documents the hearings were cancelled; clearly a potential sign of the negativity of what the documents revealed and how Healthcare Reform negatively affects large employers.
The congressional committee also made a public statement that the documents received were positive towards Healthcare Reform and nowhere did the committee mention that all four companies were considering dropping their health insurance plans because of Healthcare Reform. Deere Inc was quoted to have said, "We do expect double digit health care increases as most Americans will now have insurance and providers try to absorb the 15% uninsured into a practice." AT&T revealed it spends $2.4 billion per year for its 300,000 employees and that if it canceled its health care coverage for its employees and paid the penalty under Healthcare Reform, the penalty would only be $600 million dollars. CNN reported that if 50 percent of employers cancelled their health insurance plans, federal healthcare costs would rise by $160 billion dollars per year starting in 2016. No one knows the true affect Healthcare Reform will have on employers and how this will affect their employees, but in the next few years it will become much more apparent as the rules, regulations and affect of Healthcare Reform become clearer.
Dental Care and Insurance
More than 120 million Americans do not have dental insurance. For the hundreds of millions who do have dental insurance or coverage, these plans have very low annual maximum benefits ranging between $1,000 to $1,500 on average, which do not provide comprehensive coverage and won’t even cover the cost of one tooth implant. The American Dental Association (ADA) opposed Healthcare Reform because they felt it did not go far enough in providing more dental insurance/benefits coverage to the average American.
On its website the ADA says, “For more than a year, the ADA has been advocating for changes in the various versions of Healthcare Reform that have been introduced. Even though each version was flawed, we worked to improve it in any way we could. Had we declared our opposition early on, we would not have been in a position to influence anything and the law might have been even more objectionable. On a number of issues, we were able to improve the law and make it less onerous to both dentists and patients…We also object to restrictions on Flexible Spending Accounts (FSAs), although we do appreciate that the new law will delay those cuts for two years. Many Americans use these accounts to pay for needed dental care. In addition, the health care law does not adequately address patient protections that should apply to employer-provided health plans offering dental benefits (including free-standing dental plans), such as prohibiting plans from limiting payments on services not covered by the plan. Finally, there is no meaningful medical liability reform. “
Source - http://www.ada.org/sections/advocacy/pdfs/HCR_QA.pdf
Americans leaving and traveling internationally for dental care is going to grow significantly in the next several years, especially as Baby Boomers start looking for affordable dental care and some start retiring internationally.
Cosmetic and Plastic Surgery
Cosmetic and plastic surgery will not be affected by Healthcare Reform. Healthcare Reform does not apply to cosmetic and plastic surgeries and therefore the cosmetic surgery industry will continue to grow as Americans travel to save up to 90 percent on cosmetic surgeries overseas.
In the next few years, we will see growth in the “ethnic employee” marketplace in the US. More than one-third of the US population, about 34%, claims that they are a "minority" of a certain racial or ethnic heritage. In 2000 it was about 23%, so in just the past 12 years minorities have grown in the US by over 11% and will continue to grow. By 2050, the minority population in the US is projected to be 235.7 million out of a total U.S. population of 439 million; approximately 54% of people living in the United States will be of ethnic origin. The nation is projected to reach the 400 million population milestone in 2039. Meanwhile, the Hispanic population is projected to nearly triple, from 46.7 million to 132.8 million by 2050. Hispanics’ share of the nation’s total population is projected to double, from 15 percent to 30 percent. Thus, nearly one in three U.S. residents will be Hispanic. The Asian population is projected to climb from 15.5 million to 40.6 million. The Asian share of the US population is expected to rise from 5.1 percent to 9.2 percent.
- In 2050, the nation’s population of children is expected to be 62% minority, up from 44% today. Thirty-nine percent are projected to be Hispanic (up from 22 percent in 2008), and 38% are projected to be Whites, which will be a decrease from being a majority at 56% in 2008.
- The working-age population is projected to become more than 50% minority in 2039 and be 55% minority in 2050 (up from 34% in 2008).
The minorities and ethnic groups in America will actually be in the majority. Asians and Hispanics are the two fastest-growing minorities. There are approximately 45.5 million Hispanics and about 15.2 million Asians in the US. From July 2006 to July 2007, the Hispanic population in the US grew by 3.3 percent and the Asian population grew by 2.9%. The white population during this period grew by only .3%. In the US Census of 2000, whites accounted for 77.1% of the population, while today they account for less than 66% of the population! In New Mexico, California and Texas more than 50 % of the population are ethnic and whites are in the minority. The latest US Census Bureau report from several years ago states 66.9% of Hispanics are Mexican, 14.3% from Central and South America, 8.6% Puerto Rican, 3.7% Cuban, and 6.5% from other Hispanic countries. 54.1% of Hispanics and 56.8% of American Asians living in the US said they would consider the option of going overseas for medical care.
Minorities owned approximately 18 percent of the 23 million U.S. firms in 2002, according to a survey conducted by the U.S. Small Business Administration. The minority populations also have buying power, according to the U.S. Small Business Administration. Hispanics and Latinos constituted the largest minority business community, owning 6.6 percent of all U.S. firms, 3.7 percent of employer firms and 7.4 percent of non-employer firms.
More and more, employers and insurers realize because of increases costs of health insurance under Healthcare Reform that one way for them to save money is to allow ethnic employees to travel overseas for medical care. Insurers and employers are much more open to this concept because they understand that ethnic employees have no questions about the quality of care in their “home” country, and they have no cultural or language barriers.
Self Funded Medical Plans
Almost half of all large employers in the US self-fund their health care plans instead of utilizing a fully insured approach. Many of the largest reinsurance companies who reinsure self-funded plans have started to adopt medical tourism into their self-funded plans. The self-funded medical plan marketplace is expected to be one of the largest adopters of medical tourism in the next few years.
Limited Medical and Mini Medical Plans
While a certain portion of Limited Medical Plans will be negatively affected by health care reform there will be a portion of limited medical plans that will not be affected and are expected to grow and thrive under health care reform for people who potentially will pay the mandated fine, but still want a form of basic day-to-day, non-comprehensive medical care. Some of these affordable and low-cost health care plans have already implemented medical tourism. As health insurance costs increase, these limited medical plans will become a very attractive option for many Americans.
Expense incurred limited medical plans with copays and deductibles fall under the Healthcare Reform provision that restricts annual and lifetime limits and have been restricted and are slowly disappearing. Certain indemnity limited medical plans that filed their limited medical plan as HIPAA creditable coverage will face this same problem because of how the insurance product was filed with the Department of Insurance. These carriers will eventually exit the market, as the exceptions from the HHS eventually expire, or simply re-file new limited medical plans that would comply with Healthcare Reform or not be affected by it. Many of the indemnity, fixed-dollar types of limited medical plans are not affected by Healthcare Reform and will survive it. These plans have significant potential for massive growth as insurance rates continue to increase each year. As health insurance costs increase, more Americans may either drop health insurance, turn to limited medical plans or purchase higher deductible and higher out-of-pocket expense plans. Many may purchase a limited medical plan and pay the fine for not purchasing major medical insurance. This would fuel significant growth and enrollment in limited medical plans.
Effect of Healthcare Reform on Agent Commissions
Healthcare Reform has a negative effect on agents’, brokers’ and consultants’ commissions, their main source of income. Healthcare Reform requires that large employer groups are required to spend 85% of insurance premiums on medical claims/costs and 80% for individual and small group health insurance plans. This new mandated loss ratio requires a larger portion of insurance premium to be allocated to medical claims. This specific part of Healthcare Reform was meant to reduce insurance companies’ profitability and shrink the pie. What it also inadvertently does is reduce health insurance agents’ commissions. As the pie gets smaller so does everyone’s piece. Insurance agents have already felt the squeeze as many insurance carriers eliminate their commissions or reduce them to almost nothing. Insurance agents are being forced to find other avenues of recourse to make up for the lost commissions from health insurance premiums. The first will be to shift to a consulting fee or flat fee approach and charge this directly to the employer. The other approach is to find alternative revenue sources, one of which is medical tourism, which can provide them an alternative revenue stream to make up for lost commissions.
Inbound Medical Tourism to the US
Inbound Medical Tourism and foreign patients who travel to the US for medical care will see very little effect by Healthcare Reform. Healthcare Reform in no way raises the cost of care for foreign patients or restricts them access to medical care in any way. For years, foreign patients have traveled to the US for the high quality healthcare and for the reputation of certain American hospitals and doctors in quality and outcomes. This will continue and inbound medical tourism to the US will continue to grow year after year. We may see hospitals in the US actually favor and prefer treating foreign patients over domestic patients because of the higher profitability of treating foreign patients. This is because Healthcare Reform reduces reimbursements for Medicare and some estimates find that after the reduction in payments, 20 percent of US hospitals may become unprofitable. US hospitals may turn to making up the lost revenue with foreign patients who typically pay in some cases full retail prices for medical care. As more global health insurance policies are created and sold which allow patients in foreign countries to travel anywhere in the world for medical care, many choose American hospitals, which will grow the number of patients receiving inbound medical care in the US. The inbound medical tourism market to the US is facing increased competition as more and more US hospitals enter this market, establish international patient departments and compete with one another for foreign patients.
Domestic Medical Tourism within the US
Domestic Medical Tourism will not be affected by Healthcare Reform and is expected to continue to grow. As healthcare reform increases costs in the US, employers will be looking for innovative alternatives that reduce costs. Domestic Medical Tourism operates under two different models. The first is hospitals and clinics that offer high quality at costs that are more than 50 percent of the price of other hospitals in the US. Employers will move towards this model under a cost savings approach. The other domestic medical tourism approach is high-quality healthcare at fixed, bundled packages, allowing employers to forecast and know what their exact expenses will be. For employers looking for creative domestic options, this segment of the industry will continue to grow. Domestic Medical Tourism isn’t necessarily a new model. Since the early 2000s self-funded employers and third-party administrators have been steering members to certain hospitals and healthcare facilities based on cost or quality.
Healthcare Reform’s Past Effect on Medical Tourism
Prior to Healthcare Reform being introduced as legislation, many large US employers and insurance companies were moving forward with implementing medical tourism. Many of the big insurance companies in the US had issued Requests for Proposal, some even were ready to move forward and had site inspectors reviewing and performing site inspections on foreign hospitals for implementation. Once Healthcare Reform was introduced, major insurance companies went on the defensive. They stopped focusing on innovative new programs or anything that could have a political aspect to it, and focused on saving their businesses, profits and livelihoods that were under attack.
Therefore, they postponed their implementation of medical tourism. Once the law was passed in March of 2010, no one really knew what it meant. Most of the law had not been drafted or interpreted, nor had rules or regulations been issued. It took almost a year and a half for employers and insurers to understand the law and finally be comfortable with what the law was and how it affected them. Once they were comfortable with it, and ready to start looking at new initiatives and programs, it became clear the Supreme Court was going to announce its decision in several months. Employers and insurance companies once again put innovation on the backburner to see what would happen with Healthcare Reform. Now that the Supreme Court has upheld the law and employers understand the law and how it affects them, they will now go back to the business of planning how to implement innovative strategies.
Many in the US insurance industry feel extremely positive and even excited that since the healthcare reform law has been upheld, this will mean big movement in the US insurance industry in the area of outbound medical tourism. When Healthcare Reform first passed, the Medical Tourism Association conducted a survey of US buyers of healthcare. Seventy-one percent felt healthcare reform was extremely positive for the medical tourism industry and that more Americans would travel overseas under the new law. This sentiment and feeling has not changed, it’s even grown.
As stated earlier, the Healthcare Reform Law (PPACA) is almost 3,000 pages, and there are almost 13,000 pages of regulations and the IRS, Health and Human Services, and many other agencies have not really even gotten started yet. There are approximately 180 government committees, bureaus, commissions, boards, within the different agencies involved in providing the rules, regulation, interpretations and enforcement of the law. The move forward will be at a potentially painful pace.
As employers, insurers and agents see the effect of Healthcare Reform in the way of increased costs, some will start to implement medical tourism as a cost savings approach. In the US, costs for health care have been rising at exponential rates and employers and employees can’t keep up. Consumer-driven healthcare plans were introduced years ago as a possible way to lower health care costs and the insurance marketplace and consumers are not seeing the cost savings they had hoped for. Employers are turning towards creative methods that will guarantee significant savings and medical tourism is a solution that provides those savings. It is expected that there will be significant growth in medical tourism since the Supreme Court has upheld the Healthcare Reform law. We are going to see much more momentum as we approach January 1, 2014 when most of the major mandates and rules take effect. Since employers typically can plan as far out as one year, this means employers will need to be moving fast to comply with the January 1, 2014, deadline and to work on implementing innovative cost savings programs prior to 2014, as significant cost increases will really start to be seen in 2014 and the following years. Healthcare Reform will accelerate the growth of the Medical Tourism industry and the next few years should be very exciting times for those involved in medical tourism.
To receive more updates on healthcare reform please go to the MTA’s Healthcare Reform Update Portal which will have updates, webinars, PowerPoints, white papers and more http://medicaltourismassociation.com/en/hcr-updates.html
A Timeline/Summary of Healthcare Reform from 2010 to 2018
- Subsidies begin for small employers to provide health insurance coverage to employees.
- Insurance Companies barred from barring coverage to children who have pre-existing conditions (adults have to wait until 2014).
- National High Risk Pool to be created within 90 days of enactment.
- Dependent Age Coverage extended to the age of 26.
- Prohibition on Lifetime Benefit Limits.
- Allows for Restricted Annual Limits for essential benefits as determined by HHS.
- Preventative Services must be provided at no charge to the employee or insured.
- ER benefit must always be provided at in-network. No Prior Authorization allowed for emergencies.
- New Health Plan Disclosure and Transparency Requirements utilized.
- Grandfather plans allowed but very limited, most of the new mandates apply to grandfather plans such as prohibition on lifetime limits, dependant coverage to age 26, no pre-ex for children and allows for restricted annual limits for essential benefits as determined by HHS.
- From 2010 until 2014, businesses with 10 or fewer full-time-equivalent employees earning less than $25,000 a year on average are eligible for a tax credit of 35% of health insurance costs. (Companies with between 11 and 25 workers and an average wage of up to $50,000 are eligible for partial credits).
The tax credit remains in place, increasing to 50% of costs, for the first two years a company buys insurance through its state exchange. The Congressional Budget Office predicts that the tax credit will affect about 12% of individuals covered via the small-group insurance market, lowering their cost of insurance by between 8% and 11%.
- “Class Act” – the new government long-term care program starts. Individuals pay premiums for a minimum of five years to become eligible for daily living coverage.
- $2.5 billion in taxes and fees to drug makers starts (increases each year).
- HHS creates uniform documents and standard definitions are developed.
- 85% Minimum Loss Ratio for medical expenses established for large groups.
- 80% Minimum Loss Ratio for medical expense established for individual and small groups.
- $2,500 limit on what can be contributed to employer-sponsored Flexible Spending Accounts.
- Health Insurance Fee to fund Comparative Effectiveness is imposed - $2 annually for each individual covered, whether fully insured, self-funded, group or individual for comparative effectiveness research under a specified individual or group health insurance for plan years after September 2012.
- The threshold for the itemized deduction for unreimbursed medical expenses would be increased from 7.5% of AGI to 10% of AGI for regular tax purposes. The increase would be waived for individuals’ age.
- $8 billion insurance provider fee (tax on insurance companies).
- Insurance exchanges go into effect.
- All insurance must be Guarantee Issue with no pre-existing condition clauses.
- Rating restrictions go into effect, limits the use of age as a rating factor (3:1 Ratio, only can vary rates based on age, geographic location and tobacco use. Tobacco limited to 1.5:1 ratio).
- Prohibits insurers from rescinding coverage because of illness.
- Individual Mandate goes into effect; if you do not purchase health insurance the fine is > $95, or 1 percent of income in 2014, $325 or 2% of income in 2015, 2016 it will be >$ 695, or 2.5% of income. Childrens’ penalty is half that of the adult. The maximum fine for a family is $2,085 in 2016. After 2016, it increases by a cost of living adjustment.
- For children, the per-person sum is half the adult one. The maximum family penalty is the greater of 2.5 percent of income or three times the per-adult penalty ($2,085 in 2016). All penalties are capped at the cost of the lowest-priced conventional plan on the exchanges.
- Employer Mandate goes into effect, for over 50 employees the first 30 FTEs are subtracted (Fine $2,000 per employee annually).
- Part-time employees included in calculation for purposes of mandate and fines.
- Redefines small group coverage as 1-100 employees. States may also elect to reduce this number to 50 for plan years prior to January 1, 2016.
- A catastrophic-only policy would be available for those 30 and younger.
- Employer-sponsored plans offered outside of the exchange do not have to provide essential benefits coverage.
- Employers with 200+ employees auto enroll new employees.
- Essential Benefit Plan is created – Mandated Benefits.
- Lifetime and annual limits are prohibited for Essential Benefits.
- Coverage for approved clinical trials is mandated.
- Grandfathered plans – Prohibit annual/lifetime max and pre-existing conditions.
- No waiting periods beyond 90 days or fines for employer/insurer.
- Health Insurance Provider Fee (Tax) is increased to $11.3 billion.
- Health Insurance Provider Fee (Tax) remains at $11.3 billion.
- Health Insurance Provider Fee (Tax) is increased to $13.9 billion.
- Cadillac tax on high premium health insurance plans kicks in at $10,200 for individuals, $27,500 for family, (40% tax and people 55 and older will be allowed to have higher insurance premium before excise tax kicks in). Retirees and workers in high-risk professions like firefighting would have higher thresholds ($11,850 for singles or $30,950 for families), pegged to inflation. By 2018, a majority of health insurance plans may qualify as a “Cadillac plan.”
- Health Insurance Provider Fee (Tax) is increased to $14.3 billion.
Resources for More Information:
Medical Tourism Magazine - www.MedicalTourismMag.com
Healthcare Reform Magazine – www.healthcarereformmagazine.com
National Healthcare Reform Conference – www.healthcarereformconference.com
5th Annual World Medical Tourism and Global Healthcare Congress, October 24-26th, 2012 in Fort Lauderdale/Miami, Florida, USA
The World Medical Tourism and Global Healthcare Congress will have a special focus on US Healthcare Reform this year, as well as Healthcare Reform occurring around the world. The Congress this year will feature up to 2,000 healthcare leaders of the medical tourism and international health insurance industries, over 100 speakers and up to 100 exhibitors and sponsors. The Congress will have advanced educational workshops and general sessions by the experts in the healthcare and health insurance industry.
Medical Tourism Association (MTA)
The Medical Tourism Association™ is the first and only international non-profit trade association for the medical tourism and global healthcare industry made up of the top international hospitals, healthcare providers, medical travel facilitators, insurance companies, and other affiliated companies and members with the common goal of promoting the highest level of quality of healthcare to patients in a global environment. Our Association promotes the interests of its healthcare provider and medical tourism facilitator members. The Medical Tourism Association™ has three tenets: Transparency in Quality and Pricing, Communication and Education.
For more information visit www.medicaltourismassociation.com.
- To raise awareness of the high level of quality healthcare available in various countries.
- To promote positive and stable growth of the Medical Tourism and Global Healthcare Industry with a strong focus on Transparency and Communication.
- To provide an unbiased source of information for patients, insurance companies and employers about top hospitals, their quality of care and outcomes.
- To protect the reputation of Medical Tourism from disreputable hospitals, healthcare providers and medical tourism facilitators which may not have the same level of quality healthcare and standards.
- To serve as one voice for purposes of dealing with government organizations and the media to protect the reputation of the Medical Tourism Association’s members.
- To promote and provide a forum for communication and to increase connectivity between patients, healthcare providers, and insurance companies.
- To seek out future affiliated industries and technologies that will allow international healthcare providers to operate more efficiently in the global healthcare industry.
- To educate patients, insurance companies, agents, brokers, consultants and physicians from around the world about the growth of medical tourism and the globalization of healthcare.
Contributing Editors: Renee-Marie Stephano, Esquire, President, Medical Tourism Association,
Editor Medical Tourism Magazine: Renee@MedicalTourismAssociation.com ; Jonathan Edelheit, CEO Medical Tourism Association
Editor National Healthcare Reform Magazine : Jon@medicaltourismassociation.com