The only chain in here I see as incorrect is "... Hospitals will pass it to insurance providers, who will pass it to us in higher insurance premiums."
Only hospitals with bargaining power (larger) will pass costs to insurance companies. Medium, small and rural hospitals usually take what they are given usually (lucky to get 70 cents on the billed dollar in reimbursement). With lower reimbursement across the board (thanks Ocare) and higher operations costs, don't be surprised to see more hospital closures and rural folks having to drive to the city or pay for a rural ambulance trip cuz the rural hospta won't be there unless subsidized by it's own state dollars.