Creative Practice Solutions Offers Answers to Questions, Calms Fears as Affordable Care Act Goes into Effect

NEW YORK, Nov. 12, 2013 /PRNewswire/ -- The relationships between medical practitioners, hospitals and clinics, commercial insurance carriers, and pricing companies have always been labyrinthine. By making healthcare coverage more economical for millions of uninsured Americans, the Affordable Care Act does little to simplify the bureaucracy that characterizes the insurance environment. Responding to these and other challenges, Creative Practice Solutions has produced a series of videos that explore some of the issues involved in starting a private practice.

Inside the Insurance Industry, part 4 of Creative Practice Solutions' five-part web series, is being offered free throughout the month of November. The complete set of videos also includes Part 1: Identity and Start Up Costs, Part 2: Finding and Managing Staff, Part 3: Billing and Extra Revenue, and Part 5: The Next Step, Groups and Marketing. Each video presents in clear and simple language the challenges and opportunities associated with private practices.

Most medical professionals depend upon commercial insurance companies to secure reimbursement for some or all services rendered. Difficulties arise when administrative errors or misunderstandings slow down this process. A significant aspect of commercial insurance carriers that's sometimes forgotten is that these companies exist primarily to make money. Profit and loss concerns underpin every decision, and strategies for cutting costs are always being proposed and tested. With that fact in mind, it's easier to understand the motivations behind policy changes, claim denials and the like.

Insurance companies are relatively limited in their ability to increase profits. The avenues of cheaper labor and improved technology are already well traveled, thus companies are seeing diminishing returns. The Affordable Care Act shifts the focus to the third way to increase profits, namely through cheaper materials. In the case of health insurance, materials consist of the benefits paid out to policy holders.

The impact of the ACA on commercial insurance carriers will be felt most directly in the form of the 80 to 85 percent mandate. In plain English, at least 80 cents of every premium dollar must go toward actual medical costs, a figure known as the medical loss ratio. Historically, these companies have operated with around 70 cents paid out to providers, with the remainder being spent on administration and overhead or being banked as profit. Policy holders will see premium rebates if their carriers fall short of the 80 percent mandate.

Naturally, insurance companies have already begun adapting to the new ACA regulations. To compensate for the higher medical loss ratio of 80 to 85 percent, many companies have increased their premiums while simultaneously reducing benefits. Essentially, consumers will shoulder more of the costs for their healthcare in the form of larger deductibles and co-pays.

For smaller insurance carriers, the profit and loss balancing act is always a significant issue, but the ACA could make the climate even less friendly for companies with relatively few customers in their risk pools. These small carriers face the possibility of being squeezed out of business, as the combination of the 80 percent mandate and an influx of new policy holders eager to use their benefits throws the balance sheets into a death spiral. Should that scenario come to fruition throughout the industry, then health insurance provision will be dominated by just a few large companies — a situation that rarely benefits the consumer.

Some adaptations in the insurance industry will happen behind the scenes, but medical professionals (and their insured patients) will see several new developments first hand. As mentioned, deductibles and co-pays are certain to rise. Health savings accounts and other types of tax-sheltered accounts will become more numerous, though these almost always entail high deductibles by design. In a broad sense, having more people with insurance or Medicaid will mean a larger pool of potential customers. It's up to each private practice to make the most of that enormous opportunity.

About Creative Practice Solutions

Creative Practice Solutions is a business consulting company geared towards Medical Professionals.  With over 26 years' experience in Healthcare administration, they have improved the functioning, efficiency and collections of both private practice and outpatient hospital departments throughout New York City.  Their sister company, VGA Billing Services, Inc., collected over $14 Million for their clients in 2012.

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Creative Practice Solutions
153 West 27^th Street, Suite 1101
New York, NY 10001

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