What Does Medicare-For-All Mean for Insurance Companies? - Zupnick Associates

(by Andres Rojas)

Medicare for All is a term that evokes a wide range of emotions: longing, among its supporters; confusion, among most of the people; and sheer terror, among private insurance companies.

And why wouldn’t it? After all, Bernie Sanders’ proposal never hid his intentions of doing away with privatized healthcare altogether.

Nobody can deny that implementing Medicare for All would bring sweeping changes to the industry. However, what would those changes look like? How much would they cost? And could private insurance companies repurpose their services to meet the new reality?

The Basics of Medicare for All

The idea behind Medicare for All is simple: instead of having the freedom to choose between Medicare and private health insurance, citizens would receive comprehensive health services from the government.

Medicare for All would provide a generous amount of medical services including:

  • Inpatient services.
  • Ambulatory patient services.
  • Primary care.
  • Prescription drugs.
  • Mental health services.
  • Laboratory tests and screenings.
  • Comprehensive reproductive, maternity, and pediatric services.

Medicare for All isn’t just one plan, though, but an umbrella term that covers different proposals – with Sanders’ being the most widely accepted.

Some proposals seek to create a single-payer system that still leaves plenty of room for private insurance companies – like in Canada. The more radical bills, on the other hand, seek to sideline or outright eliminate the healthcare insurance industry.

Despite the differences, all proposals agree on having a lifetime enrollment, no premiums, and being fully state-financed.

How Medicare for All Would Affect Private Insurance Companies

If Medicare for All was implemented tomorrow, its effects would be far-reaching. Though the plan wouldn’t touch healthcare providers, it would effectively nationalize the healthcare insurance industry.

Healthcare insurance is a $1.2 trillion industry that employs millions of Americans. Nationalizing it would leave as many as 2 million administrators, medical billers, coders, and claims negotiators out of work

These jobs – which are essential in a free market economy – would become ‘superfluous’ in a government-controlled system.

Moreover, the passing of Medicare for All would be especially damaging for insurance hubs – such as Hartford, Connecticut; Des Moines, Iowa; and Pittsburg, Pennsylvania – where carriers fuel the local economy.

As for the insurance companies themselves, the effects would vary by size. Experts believe that big carriers would most likely survive.

Although their stocks’ prices will suffer in the short run, their size, diverse portfolios, and vertical integration – many large insurers also own hospitals – mean they’ll rebound eventually.

The hardest hit will be the smaller companies, as Section 107 of the Medicare for All bill would prohibit private insurance companies from selling services already covered under the act.

The ‘Cosmetic Insurance’ Argument

When questioned about the future of workers in the insurance business, many politicians supporting the bill will point out that private companies will still be able to sell supplemental coverage.

Indeed, Bernie Sanders was the first to suggest cosmetic surgery insurance as an alternative source of income for insurance companies. However, as one critic pointed out, the market for such services would be insignificant when compared to the medical insurance industry’s $1.2 trillion market value.

Medicare for All would be so comprehensive that most carriers would be fighting for whatever scraps, if any, are left on the table. Of course, everything will depend on if Biden passes the bill or implements his own healthcare plan.

How Likely Is Joe Biden to Pass Medicare for All?

Though Biden is a staunch supporter of public healthcare, it’s unlikely that he’ll support Medicare for All. In March of last year, he criticized the plan’s price tag and suggested he might veto it in the future.

Instead of universal health coverage, Biden favors injecting more federal subsidies into the state exchanges to overhaul the current system. This ‘Public Option’ would be another alternative to Medicare, but possibly with lower premiums and higher levels of coverage.

Besides the Public Option, Biden also plans to expand Medicare enrollment by lowering the eligible age from 65 to 60 in the future.

So while Biden won’t pass Sanders’ sweeping reforms, his plan could gradually give us something resembling Canada’s and Britain’s public-private healthcare system.

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