President Barack Obama says that the Affordable Care Act, deemed legal by the Supreme Court on June 28, “isn’t about politics.” Rather, “it’s about good health care policies for American citizens.”
Presumptive Republican presidential nominee Mitt Romney refutes this. To him, the decision means only that it doesn’t violate the U.S. Constitution. Other than that, he says “it’s bad policy, and bad law.”
However, that’s just the headline tit-for-tat national politics. As for the actual mandate, and what it means for businesses in Washington, there are some surprises — including a new tax for uninsured people and fines for companies that don’t provide health care coverage to employees.
The cost-versus-benefit impact of the act has many wondering and worried about its uncertainties — particularly the insurance, health care and community businesses that will be most involved in implementing the process.
“We could talk about the implications and effects of this decision forever,” said Chris Free, president of Rapport Benefits Group. “At the end of the day, it breaks down to that a lot of the things we’ve been hearing about in past years are coming to fruition. But, at this early stage, we’re just not entirely sure how.”
For the average American, Free said, there won’t be much difference — right away. However, in 2014 when the law goes into effect, all state residents must have insurance coverage through an employer or the Washington Health Benefits Exchange — or face a fine.
“The Supreme Court removed the ‘penalty’ wording and in the end made that into a ‘tax,’ but it’s basically the same thing,” Free said. “That’s a good incentive to get enrolled, though, because otherwise it’s going to come out of the pockets of anyone who doesn’t have qualified health insurance.”
Hence, upon news of the Supreme Court’s decision, stocks rose dramatically for hospital groups, who will no longer bear the brunt of paying the costs for uninsured patients.
For insurance companies, though, who will have to enroll thousands of new customers — including people with pre-existing conditions and family dependents up to age 26 — stocks were down. The situation was the same for companies selling medical equipment and services, which, under the act, will have to pay a new excise tax on their sales.
“For insurance companies, the key is that they now have to accept those with pre-existing conditions. Removing that requirement would have caused significant problems with the existing legislation,” Free said. “It actually helps keep the balance to make sure everyone is enrolled in an insurance program at the same time.”
However, in the long run, Americans will pay more for coverage, said CIGNA insurance corporation president David Cordani.
And insurance companies will be paying more to provide it.
“Premiums will go up,” Cordani said. “And the ability to decrease the amount … will be predicated on whether or not (an insurance company) can innovate with its customers and physicians to drive (them) back down.”
Although charging individuals with the responsibility to either “play or pay” regarding insurance, hospitals are treading lightly while they wait to see if all the promises from the act pan out.
At Capital Medical Center in Olympia, CEO Jim Geist wouldn’t commit, saying only that the act seems to be a step in the right direction.
“The health reform law is ultimately an attempt to solve an untenable health care problem that all providers face: the challenges of curbing health care costs and improving the quality of care we provide,” he said. “The Supreme Court’s decision helps us move forward to address these twin challenges.”
The same is true for Franciscan Health System.
“There are now more than 1 million people in Washington state without health insurance, and — as the people on the front lines who are for the uninsured in times of crisis — those in health care know the tragedy that befalls those,” said spokesman Gale Robinette. “Our highest priority is access and coverage for all, and the Affordable Care Act is a huge step in that direction.”
Marce Edwards, spokeswoman for MultiCare, echoed that sentiment.
“That the individual mandate to purchase health insurance was reaffirmed by the court, providing more access for thousands of residents in our area, is a good thing for the health of our community,” she said.
Scott Bond, president of the Washington State Hospital Association, which represents the state’s 98 community hospitals, said the act is a bold step forward.
However, with an expected reduction of $155 billion in federal payments to hospitals during the next decade — including $2.7 billion less for Washington — Bond said it’s also a step fraught with risks.
“Hospitals have a huge financial stake in health insurance expansion,” he said. “If the law works as intended, many more people who are currently uninsured will become insured — and not rely on the ER for their care. In addition, hospitals that treat a high number of the poor and uninsured will not be as burdened.”
In addition to the shift to ensuring that all Americans have health care coverage, there will be a mass expansion of those who qualify for Medicaid.
However, each state will make its own choice whether to expand services to thousands of additional people — without incurring a penalty if they decline to do so.
But while expanding the coverage bubble, the act also has churned up a number of challenges, Robinette said.
“We do remain concerned with one key component of the law,” he said, “which would require contraceptive coverage for all employees of Catholic organizations — including Franciscan hospitals.”
Franciscan’s overseer, Catholic Heath Industries, has asked the Centers for Medicare and Medicaid Services to exempt Catholic hospitals from that part of the mandate.
“We remain hopeful that CMS will not infringe on the religious liberty of church-affiliated organizations,” Robinette said. “And while the law is not perfect, it still goes a long way toward helping us care for those who are most vulnerable.”
Although the insurance and medical communities can expect the most changes, most companies will feel the impact of the act.
Small businesses which utilize chamber of commerce-affiliated insurance programs are worried about how the new system will affect their plans.
George Allen, senior vice president of government relations for the Seattle Chamber, works with the Tacoma-Pierce County, Spokane, Tri-Cities and Bellingham chambers to manage the Washington’s Business Health Trust insurance program.
“The basis for any viable insurance policy is a large and viable pool,” he said. “Small businesses have a smaller pool, making it difficult for them to find affordable coverage.”
The worry is that because of the act, associations like chamber of commerce will be barred from providing insurance to smaller companies, Allan said.
“The net result is higher insurance costs, coming at a time when we are looking at small businesses to grow our economy,” he said. “If these businesses are going to create jobs, they need a certain level of predictability. We want to do everything we can to preserve, not disrupt, that.”
One industry in particular that was disappointed with the Supreme Court’s decision to uphold the act is food service. Many restaurants and caterers has little wiggle room in their budgets for increasing insurance costs.
According to National Restaurant News, burger chain White Castle reported its net income could drop 55 percent because of the act’s requirements. And a poll of small restaurant owners showed they expect health care expenses to increase nearly 30 percent.
For American workers in general, MIT economist Jonathan Gruber — who helped write the act — estimated premiums will increase by 19 percent to 30 percent.
President Obama, though, has challenged this assertion, claiming that the act will “bend the cost curve,” and “bring down premiums by $2,500 for the typical family.”
At the Association of Washington Business — which represents 700,000 workers from nearly 8,000 companies, 90 percent of which have of less than 100 employees — President Don Brunell said the act is bad for businesses.
“For private employers, the federal health care law will continue to be a worrisome new cost at a time few can afford it,” he said. “Not only does it have the potential to increase the cost of coverage, it also will likely add to our state and federal deficits. And by accepting the mandate, we are exposed to thousands of new rules and policies for which we have few answers on how to fund or implement — and which threaten popular coverage options currently available in the private market.”
However, there are many people in the health care industry who others who don’t agree with Brunell’s assessment.
One is Judy Huntington, executive director of Washington State Nurses Association and a member of Healthy Washington Coalition.
“Health care reforms are already well under way, and progress is being made,” she said. “As nurses on the front lines of health care delivery, we’re already seeing the positive effects of reform, such as increased coverage for young adults and better access to preventive care.”
However, Free said the Affordable Care Act has a long way to go before it starts significantly saving the average American and American business some dollars on their health care premiums.
“But at least something is now in place,” he said. “So, there’s a balance between what we have now and what will be the process in the future — whatever that may be.”
Writer Holly Smith Peterson can be reached at hpeterson@BusinessExaminer.com