The Supreme Court decision upholding the federal health care law re-ignited the debate over who will be the winners and losers as the provisions of the law take effect over the next several years. Much of that debate has been heavily politicized, so unbiased answers can be extremely difficult to come by. But for those of us who have spent years getting to know both providers and payers through our work on their payment processes, some things are clear — and there is in all this an unexpected beneficiary whose impact will only grow.
The legal challenge to the Affordable Care Act focused on what has been called its individual mandate, the requirement that all Americans maintain a minimum level of health insurance or pay a tax. The penalties start at $95 in 2014 and rise to $695 in 2016, after which they are indexed to the consumer price index. Predictably, polls have shown the individual mandate is the least popular element of the law, which also placed limits on the uses of flexible spending accounts. But consumers will benefit greatly from a host of other provisions, many of which have become familiar.
For consumers, benefits abound
First among the consumer impacts is the elimination of lifetime benefit caps. Previously, health insurance companies were allowed to set limits on the amounts they would pay under a specific plan over the lifetime of the insured. The law bans those limits, and it phases out annual limits for what are termed essential health services.
Insurers are required to make health coverage available to children of policyholders until they reach age 26. They cannot deny coverage or benefits or limit benefits for a child younger than 19 because of a pre-existing condition. And the law makes it tougher for insurers to rescind health coverage.
For hospitals, a mixed bag
Though the Supreme Court decision was followed by much debate on the expansion of Medicaid, the ruling left in place provisions that will make 16 million additional Americans eligible for the program. Hospitals then can look forward to increased Medicaid revenues.
But there will be cuts in disproportional share hospital payments, which help cover the costs of caring for Medicaid and uninsured patients. This will mean hospitals will have higher average uncompensated care costs as a share of total costs. And while the law is designed to get more Americans covered, an estimated 26 million people under the age of 65 still will be uninsured when the law is fully implemented. Hospitals will still be stuck with those bills.
For insurers, a question of balance
The health care law’s intended effect on consumers – to incentivize them to have minimum coverage – promises to provide the insurance industry tens of millions of new policyholders from which to collect premiums. But as in all matters related to insurance, it will be up to the industry to manage that risk even as it becomes adjusted to the true costs of the law’s many modifications to coverage limits, rules on pre-existing conditions, extending coverage for children, and so on.
Cigna Chief Executive David Cordani has been quoted as saying that for insurers, the most significant efficiencies will come from the reworking of payments to doctors and hospitals. They will be structured so as to encourage primary care, avoid hospitalizations and reduce the errors that lead to longer stays and re-admissions.
For banks, an opportunity to grow
With the vast majority of physicians working in private practices, the changes to the health care laws provide real opportunity for banks to help their physician customers address some of their most pressing business challenges. According to a recent survey of 673 physicians conducted by MDLinx, doctors cited rising business expenses, administrative hassles and shrinking insurance reimbursements as some of the issues that threaten the financial health of their businesses.
How can banks help with these issues? That’s the focus on the second part of this post.