How the new healthcare plan works

President Obama on Tuesday signed into law the Democrats’ historic healthcare reform bill.

Democrats promise the new law will expand health coverage to 32 million more Americans, eliminate egregious insurance tactics and save the country more money in the long-run.  Republicans argue that the law will result in a government take-over of healthcare, force the U.S. into bankruptcy and usher in a new era of increased dependence on the government.

Regardless of what you think of the bill, it is now the law of the land.

Immediate Effects

Among its immediate effects:  it will be illegal for insurance companies to deny children coverage for pre-existing conditions, or drop customers from coverage once they become sick.  Small businesses with fewer than 50 employees will receive tax credits to help finance 50 percent of each worker’s health insurance costs.  Young adults who recently graduated from college can now stay on their parents’ healthcare plans until they turn 26.  Adults suffering from pre-existing conditions can now buy health insurance.

How the insurance industry will pay for it

To off-set the losses insurance companies would experience from having to fulfill these promises, the government has promised the industry an influx of new customers.  Starting in 2014, the government will require all Americans to purchase health insurance – similar to how all drivers are required to carry automobile insurance.

How it plans to lower insurance costs

To keep health insurance affordable, the government will require insurance companies to reveal how much money they spend on bonuses and administrative salaries.  Non-profit insurance companies, such as Blue Cross Blue Shield, must now maintain a medical-loss ratio – in which 85 percent of its income must be spent on medical procedures (rather than administrative salaries and bonuses) in order for it to take advantage of IRS tax benefits.  The government will implement new screening procedures over the next few years to identify and eliminate fraud and waste within the insurance industry.  And whenever an insurance company wishes to change a program, it must now go through an appeals process that gives customers the opportunity to challenge the merits of the new program.

How the government will pay for it

The government will obviously need some money to pay for the initial stages of this new plan.  Starting in 2012, the government will enforce fees against drug companies.  Starting in 2013, the government will raise taxes on single people who make more than $200,000 per year, and couples who make more than $250,000 per year.

Democrats hope that by 2014, the huge influx of new customers for the insurance industry, the new drug company fees, and the higher taxes on the wealthiest Americans should enable the new system to sustain itself – and save the country money over the long-term.

How the new system plans to save money

Democrats project that by expanding health insurance to more Americans, it will lower the cost of each individual’s health insurance overall.

This is because under the former system, patients who visited the emergency room without health insurance forced hospitals to foot the bill, which passed the costs on to the insurance industry, which passed the costs on to everyone else in the form of increased premiums.

By expanding health insurance to everyone, individuals will pay less because the responsibility is now spread out to more people – instead of forcing only those who pay for health insurance to pay for everyone else.

The new PR health campaign

The new healthcare bill also includes a PR campaign aimed at encouraging Americans to live healthier lives.  Fast food restaurants will now be required to disclose nutritional facts on their menus – similar to food in grocery stores.  The government will enforce a sales tax on tanning salons.  And the bill allocates $1 billion in credit for firms to research new techniques and therapies for preventing diseases – instead of relying on drugs.

The Politics

Many Americans remain skeptical after an emotionally charged debate in which fear embodied the primary force of opposition.  Republicans will likely use their remaining fear juice to win some Congressional seats in November.  But as for restructuring the way our healthcare system operates – it’s mission accomplished for the Democrats, and the Republicans cannot repeal it.

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