Regardless of how you may feel personally about President Barack Obama or his landmark healthcare reforms, the U.S. healthcare industry ought to be giving a sigh of relief right now.
Here's why: President Obama's re-election means that the healthcare industry finally has a level of certainty that the major coverage expansions in the Affordable Care Act will be implemented at the federal level. And certainty even certainty entailing gut-wrenching change is good for business if it comes with a payoff of 30 million new customers.
It's largely recognized that Mitt Romney could not have delivered on his promise to repeal and replace the ACA quickly if he had won. So a Romney win would have likely resulted in the ACA dying a years-long, highly politicized and unpredictable death-of-a-thousand-cuts as Republicans argued over how to dismantle the law and the Democratic Senate sought to defend it. Romney's defeat means that states, insurers, providers, vendors and pharma are all spared the chaos of having to prognosticate, plan for multiple contingencies, and react to them for the next four years.
The healthcare industry in the U.S. has been figuring out how to make money under the ACA paradigm ever since its leaders and lobbyists helped write the law in 2008-2009. Sure, the industry hates the taxes, the medical loss ratio limits, and the end of insurers ability to turn away the sick. But in the end, American healthcare executives have figured out what they need to do to profit in the post-ACA world. Providers have transformed their back office, contractual and clinical operations, adopted new healthcare information technologies (with substantial financial help from the government), and are working toward a healthcare system that can (and will) reward them for quality and efficiency.
But we all expect changes in the ACA, pushed by various interests. Here's a quick handicapping:
The taxes: To pay for the cost of extending healthcare coverage to 30 million or so Americans, the ACA includes the premium tax on fully insured plan premiums, the Cadillac tax on high-end products, and assessments that accrue to the pharma industry. All of these well-heeled groups will unleash their army of lobbyists to try to roll back those taxes. But to do that, they'll have to convince presumably deficit-conscious House Republicans to create more red ink, or they'll have to convince Senate Democrats to re-visit the ACA and figure out a way to tax someone else for it. Democrats have nothing to gain by doing so.
Broker fees: Insurance brokers have had their earnings sharply reduced because their fees are part of the cost of sales figured into the medical loss ratio (MLR). In order for health plans to keep their MLR within the 80 and 85 percent limits of the law, they've had to ratchet back those overhead costs and pay brokers less. Brokers will renew their push to have their fees removed from the calculation of the medical loss ratio. But again, doing this would push up insurance costs and it's hard to see where the political gain would come from that.
Medicare reimbursement: The law calls for Medicare reimbursement to health plans to fall again, and CMS is tightening its star quality demonstration that granted millions in rebates to health plans whose star rating quality scores where just average. The result will mean lower margins within the highly-profitable Medicare Advantage segment, and higher premiums or lower benefits for seniors. Will CMS have the stomach to squeeze this segment to try to force efficiencies. My guess is the government will try to placate the industry and assure that seniors continue to see rich benefits.
Medicaid expansion: The Supreme Court's decision giving states the option to refuse Medicaid expansion under the ACA is perhaps the greatest threat to the law itself. While most states will choose to expand Medicaid to include most adults under 133 of poverty level (paid for with 90 percent federal funding, the expansion greatly simplifies eligibility and helps states cover mental health care), the reddest of the red states will follow the lead of Texas Gov. Rick Perry and Florida Gov. Rick Scott, and reject expansion for ideological reasons. That choice will bring an immediate financial crisis for these states community hospitals, which will still have to serve large numbers of uninsured only without the millions of dollars federal subsidies to support indigent care. Those subsidies have been curtailed to pay for the ACA's extension of health coverage. In those states, the community hospitals will be forced to shift that cost, if they can, to paying customers (read: insurers and employers).
Politically, it's hard to see how these states will be saved from a crisis essentially of their own making.
So take a deep breath. The Affordable Care Act is the law of the land, and likely to remain so. And it's going to be a bumpy ride.
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