It’s not just the Obama Administration that has so much at stake over the Supreme Court’s looming decision over the constitutionality of health-care reform.
Don't forget the rest of America.
“Pretty much every industry has been in a holding pattern, waiting to see what the court rules,” says Joel Ario, managing director of Manatt Health Solutions. “The legislation touches every significant part of the health-care world; health care is 20% of the economy, and how the court rules can significantly alter each part — for better or worse.”
Americans spend close to $2.7 trillion on medical treatments each year, and The Patient Protection and Affordable Care Act significantly alters the health-care landscape. The law mandates nearly everyone have insurance by 2014 or face a fine, expands Medicaid eligibility and reforms the insurance industry.
The legislation was signed into law in March 2010, and the Supreme Court has been mulling its decision since mid-March, but companies have been steadily implementing provisions to come into compliance.
“Every state except Utah has taken millions of dollars to modernize Medicaid and build exchanges. No state isn’t actively moving forward with this reform, it’s just been happening quietly,” says Ario.
The sweeping reform has dominated the political landscape and campaign trail, but in reality, these players aren’t the major stakeholders. Experts expect the days following the decision to be dominated by political rhetoric, but the real action and telling signs of what happens next will come from within the industry. So, with the high court's ruling imminent, here are a handful of scenarios:
If the court rules the Patient Affordability Act constitutional:
Health Insurance Companies: In the long term, this industry will see an influx of new, healthy patients and a steady revenue stream to help balance the cost of the mandate.
“Under this law they have means to be able to cover everybody and they get trillion dollars in new public support to do it,” says Ario. He adds that over the next five years the industry will get $940 billion in tax credits and Medicaid expansion dollars to cover people.”
Medicaid Providers: The expanded Medicaid coverage is expected to create an estimated 18 million patients of new, paying patients every year to Medicaid outfits.
Prescription Drug Companies: More insured patients will lead to more doctors visits and script writing, sure to expand drug use.
General Practitioners: Ario says the payment and delivery reform included in the Patient Affordability Act tend tends to favor family doctors over specialists. “There are simple things included in the law that reduce the need for specialists…you will see some interesting fights in the provider world between specialists, who had been winning the payment war for the last 20, 40 years, and general practitioners.”
Insurance Companies: Over the next four to five years, J.D. Piro, senior vice president and leader of the health law group at Aon Hewitt, expects commercial insurers to take a hit because the non-coverage fine is too low. “Patients will make the rational decision to pay the fine over coverage costs. This is what happened in Massachusetts when the reform started, which caused health-care costs to rise. We will face the same thing here.”
The reform also includes an excise tax on insurers, which experts say will likely be passed on to the consumer.
Wellness Care: Some argue that consumers will wait to seek care and get insurance until they are sick, meaning doctors will see fewer patients for preventative care and more already-sick patients, who weigh more on the system.
Medical Device Companies: To help cover costs, a 2.3% tax was exercised on medical device companies. The $116-billion industry has been actively trying to get the tax repealed claiming it will kill jobs and stifle innovation.
If the court rules the entire legislation unconstitutional:
Drug Companies: The reform imposes fees on drug companies which some experts claim will mitigate any long-term growth. Reimbursement cutbacks will also hurt the industry, which is already nervous over potential fees and pricing.
Small Insurers: According to Ario, small, more-niche insurers would benefit more from the old system. “The plan for those guys is pretty much to find a targeted market place that is more stable and will have more problems under the ACA.”
Hospitals: It’s no secret that our nation’s hospitals have a debt problem because they have to treat insured, uninsured and under-insured patients. While hospitals do currently get some aid from the federal government, Ario said it doesn’t cover all the costs, forcing hospitals to raise rates on other payers.
“Hospitals have every interest in coverage expansion so that when people show up, they can cover the costs,” he said.
Employees with recently-added reforms: Employers have been instituting the reform's requirements, according to Ilyse Schuman, shareholder with Littler Mendelson, and if the court strikes down the law, they will likely have to follow the lead of insurance companies.
“It’s not easy to take away and undo changes that are in place, employers have to go through the right procedures to do that or else they can really hurt morale,” she said.
Adults Under Age 26: Although many of the major providers and employers said they will continue to offer coverage to anyone under age 26, paperwork and tax implications might change their mind.
“When the reform was passed, the IRS said companies can cover people to 26 without having to impute incomes, without the mandate or if [the entire law] is struck down, the IRS could force employers to impute income to the employees based on old tax rules which would become a big issue with payroll,” explains Susan Nash, partner with McDermott Will & Emery.
Experts agree that if the mandate is stripped out of the reform, but everything else is left standing, it would be detrimental to almost all the players involved. The mandate expands the pool of people paying into the system making other parts of the reform affordable, particularly the requirement that insurers can’t deny coverage to anyone.
Expert expect that if the mandate is ruled unconstitutional, the community ratings provision and the guaranteed issue will be thrown out. Without the mandate to force coverage, insurance companies would be forced to provide coverage to the nearly 30 million uninsured Americans without the necessary financial resources.
Hospitals would also face increased hardships without the mandate since they would be left with the reform’s price cuts but not the promised entry of paying patients, making their bad debt situation even worse.
And just because the court has made its ruling on the legislation, experts say this will not end the uncertainty surrounding the future of health care in this nation.
“There is still going to be uncertainty what is going to happen politically, this could be end of Supreme Court ruling, but it is certainly not the end of the debate,” says Schuman. “The ruling could be the end of just the beginning.”
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