It is estimated that 25 percent of hospital care goes unpaid for because people do not have health insurance. Now with the mandate as part of the Affordable Care Act, hospitals can have some assurance that millions of people admitted through their doors will have health insurance.
This is a cost-saving mechanism that reduces the need for punitive cost-shifting in order to pay for the uninsured. Therefore, insurance premiums can be assessed based on an individual’s needs rather than being inflated to pay for those who have chosen not buy insurance.
Hospitals, drug makers and biotech companies are expected to be innundated with new customers because of the law's requirement that most Americans have insurance by 2014 or pay a fine. Insurers also are expected to experience a boon, but they'll also face a new round of fees and restrictions. It's unclear if medical device makers will get the same jump in business, and they'll be paying new taxes.
Meanwhile, the law is expected to boost health care stocks both by increasing access to — and use of — health care. On Thursday, shares of hospitals and some insurers rose following the ruling. Shares of the largest U.S. drug companies were mixed, while shares of medical device makers dipped slightly with the broader market.
The ruling was a win for hospital operators because it will add millions of Americans to the rolls of the insured, vastly expanding the pool of health care consumers, said Jeffrey Loo, a stock analyst with S&P Capital IQ, a research group, reported in the Washington Post.
Under the current system, about one-fourth of the care provided by hospitals is never paid for, either because debts go bad or because the patient is uninsured, Loo said. He said the law will cut the portion of care that is not paid for in half.
However,, a financial analyst for Citi Investment Research, warned clients that hospital stocks could “erase all their gains” from the court decision if is elected president this fall. He has pledged to repeal the law.
However, not all analysts agree. Moody's Investors Service on Thursday said the health-care reforms in the federal Affordable Care Act remain a credit negative for not-for-profit U.S. hospitals despite the positive effects of expanding insurance coverage for uninsured patients.
Moody’s Investors Service says that the SCOTUS decision won’t make that much of a difference for nonprofit hospitals, but federal budget issues likely to cause cutbacks in Medicare and Medicaid mean tough times. As a result, Moody’s has issued a negative outlook for nonprofit hospitals due to a likelihood of bond rating downgrades exceeding upgrades in 2012.
Insurance companies win also despite the early down turn in the market
Insurance companies will be gaining millions of new customers, so the early sell off came a bit of a surprise to some analysts.
UnitedHealth Group, the biggest insurer, was down a fraction, less than the broader market, in mid-afternoon trading. It had been down as much as 7 percent. WellPoint was down 5 percent, Aetna and Cigna about 3 percent.
Analysts with Jefferies, an investment bank, said in a note to clients that “after the dust settles, we are generally bullish” on companies like UnitedHealth because they will benefit from about 18 million new customers in 2014 and millions more after that.
How will the ACA be beneficial in your state?
In California the number of uninsured is 7,209,000 or 19 percent of the population.
WHERE THE STATE STANDS: California has worked to be a model for the health care law and has begun implementing parts of it already, including creating the beginnings of health care exchanges to provide consumers a marketplace to purchase insurance policies starting in 2014. The state has also already banned insurers from refusing coverage for children with pre-existing illnesses and young adults are allowed to stay on their parents’ plans through age 26 in California.
View the statistics in your state here.
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