Has the law benefited or hurt the healthcare industry?


The benefits of the Affordable Care Act outweighed the losses during the first year of the law, according to Wall Street analysts and policy experts. Insurance companies, hospitals and the pharmaceutical industry have been by far the biggest winners, gaining new customers, new paying patients, and new prescription users, respectively. The healthcare reform has particularly helped insurers transition from a period of lean cows to one of good cows. The private insurance market had been on a steady decline as of late; an increasing number of firms stopped providing employees with insurance, and more people were no longer able to afford coverage.

While that trend is expected to continue, Obamacare’s federal subsidies have helped millions of individuals to afford coverage. As a result, insurance companies are experiencing a surge in the demand for private insurance; a demand they have not been slow to meet. For example, for-profit company UnitedHealth Group – which runs one of the country’s largest insurance firms – opted to offer individuals plans through the healthcare exchanges in only a few states. In 2015, though, the company plans to offer plans in about 24 states. Additionally, more than 50 new insurance companies will vie for a piece of the pie – and with healthcare accounting for approximately $3 trillion in spending in the U.S., there probably is plenty to go around.

All told the S&P 500 Health Care Index increased by 24% during the last year for for-profit health insurers, hospitals and drug companies. It’s not all wine and roses, though. Nonetheless, even when there are drawbacks there seems to be a silver lining to offset them. Insurance companies are subjected to state and federal authorities, and there is a lot more competition. The amount of money they can make on a person’s coverage is limited – and some may even come up on the losing end as they attempt to lure customers with cheap policies. Furthermore, payment cuts for the private Medicare plans they operate are expected. On the other hand, the law has provisions to protect insurance companies if they miscalculate costs. The majority of insurers “sound more and more optimistic that they will have positive margin on their book” in 2015, says healthcare analyst for Leerink Partners Ana Gupte.

Hospitals are in a similar position. A provision of the law cuts their Medicare payments by $260 billion in a period of ten years. Conversely, they have benefited from more insured customers being able to pay their bills, especially in the states that chose to expand Medicaid. Moreover, the Department of Health and Human Services predicts that hospitals will save $5.7 billion in uncompensated care costs this year thanks to more people having insurance. About $4.2 billion of those savings has gone to the 25 states (and D.C.) that opted to expand Medicaid.

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