Insurance agents often focus on what carriers, CMS, and state insurance departments are doing. However, some of the most important changes in healthcare are happening inside America’s hospitals, and these changes will eventually affect every insurance consumer and professional in the country.
Hospitals are under pressure from many different directions right now. Fewer insured patients, changes in government payments, staff shortages, and more hospital mergers are all factors that could reshape healthcare for everyone in the country.
More Americans Without ACA Coverage Means More Uncompensated Care
When the extra Affordable Care Act (ACA) premium subsidies ended, many Americans saw their monthly premiums go up a lot. Some people dropped their coverage completely, while others are waiting to buy insurance.
This situation creates a familiar problem for hospitals. Emergency departments must treat and stabilize patients even if they cannot pay.
When more patients come in without insurance, hospitals have to cover more unpaid care costs. Some large hospital systems are already seeing more emergency visits, fewer elective procedures, and real financial strain because of the loss of ACA subsidies.
Hospitals now need to find new ways to pay for these services they are required by law to provide to anyone who comes to the emergency department. This is a key issue in their contract talks with both private and government health insurance providers.
Medicare and Medicaid Continue to Dominate Hospital Revenue
Many people think commercial insurance is what keeps hospitals running, but that’s not the case. Today, most inpatient hospital days in the United States are covered by Medicare and Medicaid.
Hospitals are aware that government payments for Medicare and Medicaid usually do not cover the full cost of providing care. The Medicare Payment Advisory Commission (MedPAC) continues to report that hospitals lose money on Medicare fee-for-service, meaning providers often get paid less than it costs to care for patients.
Now that more than half of Medicare beneficiaries are in Medicare Advantage (MA) plans, hospitals have to negotiate payments with each insurance company in their area, as well as with CMS. These talks usually start with Medicare rates as the baseline.
The problem is that MA plans are under pressure to save money as their Medical Loss Ratios (MLRs) go up. Now, these plans want to pay hospitals less than Medicare rates, which is leading more hospitals to leave MA plan networks.
As more people join Medicare because of an aging population, hospitals will need to find new ways to bring in money from other payment systems to ease the pressure on their budgets.
Medicaid Is Becoming More Complex
Hospitals that care for many Medicaid patients also face a lot of uncertainty. Many states rely on extra Medicaid payments and Disproportionate Share Hospital (DSH) funding to help cover the costs of treating low-income and uninsured people.
If Medicaid funding policies or extra payment programs change, it will have a big impact on hospitals that already have tight budgets, especially those in rural areas and safety-net hospitals.
Staffing Challenges Haven’t Gone Away
Even though the worst staffing problems after COVID-19 are getting better, hospitals still have trouble finding enough nurses, doctors, technicians, and other specialists. Labor costs are still one of their biggest expenses, and burnout and competition for workers make hiring and keeping staff difficult.
Because labor costs are rising faster than what hospitals get paid, they have less money to spend on expanding their facilities, investing in new technology, or growing their services.
Expect More Hospital Mergers and Acquisitions
Financial pressure is also speeding up hospital mergers and partnerships. Hospitals are looking to join together, form partnerships, or affiliate with larger health systems to cut administrative costs, get better deals in negotiations, and share expenses.
Experts think hospital mergers will keep happening as payment pressures, inflation, and unpaid care continue to challenge independent hospitals.
What This Means for Insurance Agents
Healthcare is more connected than ever, so knowing what is happening in hospitals helps insurance professionals explain why coverage options, provider networks, extra protection, and long-term planning are important. The financial health of hospitals directly affects the insurance market, since premiums and other rates depend on what insurers have to pay hospitals.
As the cost of care goes up, commercial, ACA, and MA insurers have to negotiate harder over payments. So what should insurance agents do?
Employers will still need agents’ expertise to handle rising costs, which affect both their budgets and their employees’ finances. ICHRA is one tool that can help. But all insurance markets will need indemnity products to protect clients who have no coverage or not enough coverage.
Hospital indemnity products can protect your clients and also give hospitals some much-needed revenue to help them get through these tough financial times.
These trends give agents a chance to teach clients not only about insurance products, but also about the bigger healthcare picture that affects premiums, provider choices, and long-term costs. The hospital story is about both hospitals and every American who relies on healthcare, as well as every insurance agent helping families get ready for the future.
The Agility Difference
As the insurance market changes, Agility helps agents stand out by communicating updates and offering our team’s expertise to help you grow. If you have questions or want to connect with our ACA, Medicare, ICHRA, Group, or ancillary experts, connect with our dedicated Producer Support at (866) 590-9771 or support@enrollinsurance.com.
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