Transitioning from the political to the public arena, the healthcare restructuring and other legislative changes will have a substantial impact on the insurance industry and the consumer in 2011, with a different landscape for both individuals and brokers.

2011 will bring some big changes,both internally at companies and for the consumer as well. Although many components of the law won't come into play until 2014, significant portions of the healthcare reform law took effect on Jan. 1. Every demographic will be affected and needs to be informed about the new insurance landscape for 2011.

Here's what lies ahead:

Insurance company financial accountability. Stringent regulations have been placed on insurance companies. Under the new laws, carriers that provide individual and small group policies will be required to spend 80 percent of their premium dollars on medical services. Previously, insurance companies could pocket high profits without being accountable for the level of services provided to their customers. In 2011, insurance companies will be forced to cut administrative costs and limit corporate profits to meet the new 80 percent premium level. If they fail to do so, they are now required by law to provide rebates to consumers.
Wellness check-ups. Specifically, co-payments and deductibles can no longer be charged for preventive care medical services. This will enable all Americans to get regular check-ups to help detect potential health problems. When people with heart disease, cancer and diabetes are diagnosed earlier, faster treatment can aid in the prevention of long-term complications of treatable diseases, which not only cost more in consumer dollars, but cost people their lives,
Medicare Part D “donut hole.” In 2010, Medicare recipients only received a $250 reimbursement for prescription drugs. Now, seniors on Medicare will get a 50 percent discount on brand-name drugs while in the “donut hole,” a gap in the Medicare Part D prescription drug coverage plan, according to Yvette Bickcom, account executive at Alper Services. Medicare Part D currently covers up to $2,700 per year in prescription drug payments, then stops paying for medications until costs exceed $6,100. This means Medicare Part D coverage recipients are responsible for paying all their own drug costs between $2,700 and $6,100. This gap in coverage will be eliminated completely by 2020.
Underwriting procedures will change for group and individual employee benefits. In many states, the underwriting form has been switched to a universal document. In previous years, the forms only went to one potential company but now, underwriting requests will be sent to several different companies, which will create long delays. Consumers will now face a longer “limbo” time where their applications are being reviewed, with little to no information about the status. Insurance companies will have a large volume of applicants with little to no additional staff to support the large influx of applicants.
State unemployment tax will increase. At least 46 states struggled to close shortfalls when adopting budgets for the current fiscal year. These deficits came on top of the large shortfalls that 48 states faced in fiscal years 2009 and 2010 so unemployment insurance (UI) funds in many states are at critically low levels due to the large numbers of people out of work for extended periods. Many employers will see a trend that promises to send state employer UI contribution rates higher in 2011 to replenish depleted UI trust funds and repay federal loans taken to allow states to continue to pay benefits. In Illinois, the UI employer contribution and tax will increase by a factor of 5 in 2011. This increase will be particularly hard on nonprofit and 501(c)(3) organizations.

We look for the impact of the substantive changes to the insurance industry to continue well past the new year as subsequent phases of the legislation and regulation continue to be enacted.

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