Insurers wait for verdict on health care law and their bottom line

Jun 17, 2012
Originally published on June 15, 2012 3:25 pm

All eyes these days are trained on the U.S. Supreme Court, which is expected to rule sometime this month on the constitutionality of the Affordable Care Act.

But some people are waiting more anxiously for the court to rule than others. Among them are those with a major financial stake in whether the law goes forward or not and if so, in what form.

Among them is Mark Bertolini, the chairman, president and CEO of Aetna, the nation's third-largest health insurer.

He says at one level, the Affordable Care Act represents a huge opportunity for the U.S. health insurance industry.

"Our organization has taken the view that when someone takes a $2.5 trillion industry and throws another trillion dollars into the bag, shakes it up, throws it on the table, and says 'Who wants it?' that's the time to get creative," Bertolini said in an interview.

That trillion dollars, of course, represents federal government's contribution to the 30 million or so people expected to gain insurance coverage under the law — about half of them with private insurance.

But even with the prospect of all those new customers, the law has been something of a mixed blessing for the insurance industry.

For example, you'd think the industry would love the idea of requiring most people to either have insurance or to pay a penalty. But from the start, insurers have been worried that the penalty in the law for not having insurance is too small.

They worry that healthy young people in particular would rather pay the penalty than pay for insurance.

Bertolini says that incentive for young people to forgo coverage gets even bigger because the law also requires insurers to narrow their price variations based on age, "which means generally the healthier, younger people will pay more, and the sicker, older people will pay less." Currently, insurers can charge older people seven times more than younger people; under the law, that will be reduced to three times.

And while that will save money for those who are older, he says, "the impetus, even beyond the penalty, to not get coverage will be even driven harder by the fact that younger, healthier people will have to pay a lot more for their health care."

As a result, he says, if the court strikes down the insurance mandate, even with all the new customers it might not be the worst thing in the world for the insurance industry.

"I'm less concerned about how they rule and more concerned about when we can actually get at fixing this," Bertolini said.

But by fixing, Bertolini means likely getting Congress involved again; either to remedy what he sees as the law's existing flaws, or to address the aftermath of a decision that strikes down all or part of the measure. He presumes neither will happen until after this fall's elections.

Toni Preckwinkle, president of the Cook County Board in Illinois, on the other hand, hopes she won't have to wait that long for relief under the health law.

Even though Preckwinkle isn't technically a health care provider, she still has a major stake in the Affordable Care Act.

"We have a county budget of about $3 billion," she said in an interview. "And 35 percent of it, so it's a little more than a billion dollars, is health care."

That includes Preckwinkle's county hospital that the television show ER was based on. More than half of the county's hospital patients have no insurance, and more than 4 out of 5 of its outpatients are uninsured.

And the result?

"Out of that billion dollars in the budget, we provide more than half a billion dollars in uncompensated care," she says.

The Affordable Care Act, however, is scheduled to provide some financial relief for places like Cook County. Starting in 2014, many more people will be eligible for the Medicaid program for those with low incomes. The county estimates this will mean about a quarter of a million more among its population alone.

So officials recently got approval from the state to start enrolling many of those people early — possibly as soon as next month. Now they just need a final OK from the state's governor and officials in Washington.

Preckwinkle says it could make a big difference to the county's budget. "It would mean tens of millions of dollars to our system immediately, and over time, hundreds of millions."

And if the court overturns the law, or the Medicaid expansion — which is one of the issues before it? Does the county have a Plan B?

"Uhhhh — I guess the short answer is no," Preckwinkle said.

Which leaves Preckwinkle, and millions of others intimately attached to the nation's health care system, just watching, and waiting, for the court.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

AUDIE CORNISH, HOST:

I'm Audie Cornish. And in this part of the program, the wait for ruling on health care. Many are anxious to see what the Supreme Court decides about President Obama's health law. That includes doctors in hospitals, but also insurance companies and employers. NPR's Julie Rovner asked a few of those whose business lives are effectively on hold how they're coping.

JULIE ROVNER, BYLINE: It's not like Mark Bertolini doesn't have plenty to keep him busy. As the chairman, president and CEO of Aetna, he oversees the nation's third largest health insurer. So naturally, he's a little concerned about what the court might do. Or is he?

MARK BERTOLINI: No, I'm not concerned. Actually, no.

(LAUGHTER)

ROVNER: Bertolini is teasing, but only sort of. He says at one level, the Affordable Care Act represents a huge opportunity for the U.S. health insurance industry.

BERTOLINI: Our organization has taken the view that when somebody takes a $2.5 trillion industry, throws another trillion into the bag, shakes it up and throws it on the table and says, who wants it, that that's the time to get creative.

ROVNER: That trillion dollars, of course, is the federal government's contribution to help pay for the 30 million or so people expected to gain insurance coverage under the law. But the law has been something of a mixed blessing for the insurance industry. For example, you'd think the industry would love the idea of requiring most people to either have insurance or pay a penalty.

But from the start, insurers have been worried that the penalty in the law is too small. They worry that healthy, young people in particular would rather pay the penalty than pay for insurance. Even worse, Bertolini says, the law will also end up making insurance more expensive for those younger, healthier people.

BERTOLINI: So the impetus even beyond the penalty to not get coverage will be even driven harder by the fact that younger, healthier people will have to pay a lot more for their health care.

ROVNER: As a result, he says, even if the court strikes down the insurance mandate, it might not be the worst thing in the world for the insurance industry.

BERTOLINI: I'm less concerned about how they rule and more concerned about when we can actually get out fixing this.

ROVNER: By fixing this, Bertolini means likely getting Congress involved again, either to fix the existing law's flaws or to deal with the aftermath if the law or some part of it is invalidated. He presumes that won't happen until after this fall's elections. Toni Preckwinkle, on the other hand, hopes she won't have to wait that long for relief under the health law. She's president of the Cook County Board in Illinois.

And unlike Aetna's Bertolini, she doesn't choke when you ask her if she's concerned about what the court might do.

TONI PRECKWINKLE: Trepidation, I think, would be the right word.

ROVNER: Preckwinkle isn't technically a health care provider or even an employer, but she still has a big stake in the Affordable Care Act.

PRECKWINKLE: We have a county budget of about $3 billion. I think it's 2.9, something like that. And 35 percent of it, so it's a little more than a billion dollars, is health care.

ROVNER: That includes the county hospital that the television show "ER" was based on. More than half of the county's hospital patients have no insurance, and more than four out of five of its outpatients are uninsured. And the result?

PRECKWINKLE: Out of that billion dollars in the budget, we provide more than half a billion dollars in uncompensated care.

ROVNER: The health law is scheduled to provide some relief for places like Cook County. Starting in 2014, many more people will be eligible for the Medicaid program for those with low incomes. The county estimates about a quarter of a million more. Some states have started enrolling people early, however, and Cook County wants to do that, too, perhaps as soon as next month.

Preckwinkle says it could make a big difference to the county's budget.

PRECKWINKLE: It would mean tens of millions of dollars to our system, you know, immediately, and over time, hundreds of millions.

ROVNER: And if the court overturns the law or the Medicaid expansion, which is one of the issues before it, does the county have a plan B?

PRECKWINKLE: I guess the short answer is no.

ROVNER: Which leaves Toni Preckwinkle and millions of others intimately attached to the nation's health care system just watching and waiting for the court. Julie Rovner, NPR News. Transcript provided by NPR, Copyright NPR.