Health Care Firms See Mixed Blessing In Overhaul : NPR


March 23, 2010

The health care bill that President Obama signs into law Tuesday promises to fundamentally change the competitive landscape for many U.S. businesses. Although many will now face higher taxes and more regulation, there’s also a big upside: They’ll gain access to millions of new customers.

For more than a year, health care companies have closelywatched the debate in Washington, trying to figure out what it might mean for the industry.

There have been so many iterations of this, it’s been hard to follow the good news,” said Dan Mendelson, CEO of Avalere Health, which advises companies about health care policy. “Right now … the die has been cast and these companies can move on and try to plan strategy.”

Mendelson said that for most companies, the bill approved Sunday night is neither very good nor very bad.

“Across each of the different segments there are pieces that will be good and pieces that will be more challenging,” he said.

New Customers

On the plus side, the bill will bring as many as 30 million new paying customers into the health care system. Many small businesses that don’t now provide health care coverage will be required to do so, and they’ll be given tax credits to make it easier. That has enormous implications for drug makers, hospitals, nursing-home companies and firms that make defibrillators and artificial joints.

Jeffrey Kleintop, chief market strategist for LPL Financial, said many of these companies have been struggling to expand their customer base. Now, almost overnight, it’s been done for them.

“Historically, the key for these industries really hasn’t been pricing,” Kleintop said. “A lot of these companies just don’t make money by jacking up prices each year. On average, their prices stay relatively flat. It’s really all about volume.”

Kleintop noted that a huge percentage of prescriptions never get filled in the U.S. each year because patients can’t afford them. Now they can. In fact, drug makers have a lot to gain from the bill.

“They’re going to get a new base of customers they don’t have today, and a third party for the most part will be picking up the tab for brand drugs, and that will lead to a nice new source of revenue,” said Edward Kaplan, senior vice president of The Segal Co., a human resources consulting firm.

Some Downsides

There is a downside for drug companies. They’ll have to pay big fees, and there will be new restrictions on how much they can charge for their products. But on balance, they’ll probably come out ahead, which is why the pharmaceutical industry supported the bill.

The picture is also mixed for insurance companies. Although President Obama and other Democrats railed against the insurance industry in the run-up to the vote, Kaplan says insurance companies will see some benefits.

“I think most of the insurance companies will see a 10 percent increase in potential market share without a lot excessive regulation,” he said.

But there will be new regulations. Policies will be sold on state-supervised marketplaces called exchanges. There will be restrictions on the premiums insurers can charge, and new requirements that they accept customers with pre-existing medical conditions. Insurers will face new excise taxes. But Kaplan said he thinks insurance companies will be able to adjust over the long haul.

“The reality is these insurance companies have a way of understanding risk and measuring risk and passing on that risk to the market,” Kaplan said.

Some insurance companies are likely to have a tougher time than others. Among those most affected are those in the Medicare Advantage program. Funding for the program will be cut, which could push up costs, making it less attractive to the senior citizens it serves.

But for the most part, insurance companies, like the health care industry as a whole, have survived the health care bill in much better shape than they feared. Now they have t

via Health Care Firms See Mixed Blessing In Overhaul : NPR.


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