By Marni Usheroff August 19, 2015
Obamacare is reshaping U.S. businesses in a number of significant ways.
It may have seemed as though the country’s largest health insurers were playing a frenzied matchmaking game in July.
Amid rumors that the top five health insurance companies were looking to bulk up with acquisitions, Aetna Inc. scooped up Humana Inc. and then Anthem Inc. bought Cigna Corp. three weeks later. These deals followed on the heels of a smaller one earlier in the month, when Cetene Corp. snared Health Net Inc.
By August, the top five had become the top three. But why? Experts explained, and the media reported, that all this rapid-fire coupling was partly the work of the Affordable Care Act.
Health care reform, or Obamacare as it’s often called, has been playing a big role in business news lately. Whether dramatically, as with this health insurance merger mania, or more subtly, as a growing number of health care consumers leads to a rise in clinics at shopping centers, health care reform has had a major impact on the way hundreds of companies do business in the U.S., making it rich terrain for business reporters.
But understanding the massive law itself can be confusing, especially for business journalists who may not have followed the reforms from the start. Trying to untangle it all on deadline can feel like wrestling with knotted strands of Christmas lights.
We’ll take a look at some parts of the law that have been most widely reported on in the business news, explain what they mean and describe how they’re affecting companies.
Increased Demand
Doctor visit ©Laura Smith
One of the biggest results of the Affordable Care Act is that more people have health insurance coverage, which has increased the number of health care consumers. This was accomplished in a few ways.
The individual mandate required all non-exempt U.S. citizens and legal residents to have qualifying health coverage—or else pay a tax penalty. Individual enrollee numbers also got a boost from the premium subsidies granted to those with lower income and offered through government-run exchanges, as well as from rules dictating that individuals can’t be denied coverage due to pre-existing medical conditions. Additionally, the law expanded the number of people who qualify for Medicaid.
Employers are also expected to offer coverage to their workers. The fine print? Big companies with 50 or more full-time workers have to pay a fee if they don’t offer adequate, affordable coverage to full-time employees if one or more of those workers gets a premium tax credit. And really large companies with 200 or more workers must automatically enroll employees into plans with the option to opt out.
Now that about 17 million more people have health insurance under Obamacare, that’s impacted businesses in a number of ways.
As the health care market has been flooded with demand, many companies and investors have sought to benefit. Venture capitalists have poured billions into digital health firms over the last year and a half. These digital health startups are looking to capitalize on inefficiencies in everything from choosing the most cost effective insurance based on your health to filling your prescriptions and mailing them to your door in presorted daily packs.
Big, established companies have also sought to profit. Retail chains such as Walmart, CVS and Walgreens have all opened walk-in clinics in some of their stores to offer increasingly sought after urgent or primary care services in a convenient setting. The trend is even reshaping shopping centers as doctors increasingly want to open clinics in retail settings frequented by consumers who no longer avoid routine care visits for lack of insurance coverage.
But not all companies have seen Obamacare as a big business opportunity. According to data from the Bureau of Labor Statistics, many part-time workers are working fewer hours since the law took effect. This could mean that some companies have cut workers’ hours to skirt the 30-hour per week criteria that defines a full-time employee under the Affordable Care Act.
Separately, the number of people voluntarily choosing part-time employment has risen, according to Bureau of Labor Statistics data, possibly because these workers can now get health insurance coverage without having a full–time job, even if they have a pre-existing condition.
Fee-for-Service Versus Value
Another feature of health care reform having a major impact on business is an increasing move away from paying medical providers for the number of services they deliver, instead paying them based on the effectiveness or quality of those services.
The Affordable Care Act has encouraged this transition by creating new payment models that reward value over volume. These include Accountable Care Organizations (ACOs) and bundled payments for episodes of care.
An ACO is a group of doctors, hospitals and health care providers that work together to provide higher-quality coordinated care to their patients, while slowing health care cost growth. If the ACOs save Medicare and Medicaid money, those ACOs can share in the savings.
Similarly, under payment bundling, hospitals, doctors, and providers are paid a flat rate for an episode of care, such as a surgical procedure, rather than each service or test being billed separately to Medicare. It’s supposed to provide incentives to deliver health care more efficiently while maintaining or improving quality of care.
This shift towards incentives for increasing overall “population health” is part of the reason we’ve seen a big bump in medical provider consolidation and strategic partnerships that seek to bring under one umbrella all the elements of the health care continuum. For example, providers sometimes collaborate so that they cover a patient from preventative health care to hospitalization and then to post-hospitalization care. This helps providers better support the overall population’s health.
Meanwhile, all that dealmaking between health insurance companies discussed earlier partly represents an effort by these companies to gain greater leverage with health care providers. They are also consolidating in order to diversify and cut costs because Obamacare limits their profits to a certain percentage of premium revenue. But as insurers consolidate, health care providers may consolidate, too, hoping to gain more leverage of their own.
These key provisions of the Affordable Healthcare Act clearly are already having a big effect on businesses even while it’s still early days.
In the next part of this two-part series, we’ll take a look at parts of the law business reporters can mine to find stories.
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The Kaiser Family Foundation offers great resources for understanding the ACA. Also check out the ACA itself at the U.S. Department of Health & Human Services’ website.
