Should Canadian Snowbirds Care About Obamacare?

Unless you have been hiding under a rock, you will have heard more than you wish from the US media about Obamacare. Officially known as the Affordable Care Act, the ACA promises to “reform” the way health care is provided and paid for in the US, provide insurance coverage for the uninsured, and restrain the costs of health care overall.  

For Canadians, watching the debate may seem little more than a spectator sport. But for snowbirds and frequent travellers to the US, the implementation of Obamacare could have substantial implications for the travel insurance they carry with them—perhaps not this year, but soon enough.

The ACA, which is being phased in over a few years, has 13,000 pages of rules and regulations, some of which have already impacted hospitals, doctors, and other providers, causing them to cut back on services, and forcing health insurers to raise their premiums to the 85 per cent of Americans who already have health insurance.

I wrote, in my post last week, that the giant multicentre Cleveland Clinic—one of America’s leading health care providers (with hospitals in Florida and Arizona) —was going to cut up to $300 million off of its operations in 2014, largely in response to anticipated shrinking revenues from the federally-funded Medicare program for the elderly, and Medicaid (state programs for the poor). These two groups generate about 40 per cent on average of most hospitals’ revenues.

But the Cleveland Clinic is only one example of the dilemma faced by almost 5,000 hospitals across the nation: being asked to care for more patients (the uninsured), while being paid less.

How might this impact Canadian travellers?

Canadian travel insurers negotiate discounts with American hospitals in return for directing patients with medical emergencies to them. Sometimes they negotiate discounted rates with hospitals face to face, more often through third parties or even American health insurers. And what they have seen in the past is that when hospital reimbursements from government programs such as Medicare and Medicaid are cut back, hospitals shift their “costs” of treating the uninsured to private insurers (that’s where you get your travel insurance) whose premiums go up. On average, about 5 per cent of an American hospital’s expenses are consumed by treating indigents or the uninsured.

Some Canadian travel insurers have already told me that they are very nervous about the repercussions of Obamacare, and the US hospitals they deal with are even more nervous about the possibility of holding premiums to an affordable and sustainable level while being asked to do more.

The provider networks Canadian insurers rely on to take care of their clients throughout the US are critical lynchpins in the viability of travel insurance. Without such networks, Canadian travel insurance premiums could be multiples higher than they are now.

In the meantime, Canadian travel insurers can only watch and wait. But one thing is certain: For Canadians who travel to the US frequently, the debate about Obamacare is more than a spectator sport.

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