Supreme Court health care ruling has potential to help, hurt insurers
BY FRANCINE KNOWLES Business Reporter June 25, 2012 5:38PM
In this photo taken, Monday, June 25, 2012, Carol Paris of Leonardtown, Md. demonstrates outside the Supreme Court in Washington. On Thursday the Supreme Court will deliver their ruling on President Barack Obama's health care package. (AP Photo/Evan Vucci)
Updated: July 27, 2012 6:18AM
The Supreme Court ruling Thursday on the Obama administration’s health care law could open the doorway for millions of new customers for Blue Cross and Blue Shield of Illinois and other insurers, or lead them to back out of the individual insurance market, industry analysts say.
Those are among the scenarios expected to play out for insurers depending on whether the court upholds the law, strikes it down or opts to maintain certain provisions of it.
“If the court keeps the law in place as it is now, the [Congressional Budget Office] says 32 million more people will have health insurance,” said Robert Laszewski, president of consulting firm Health Policy and Strategy Associates. “That’s 32 million more customers for the industry, 32 million more patients walking into the hospital with an insurance card.”
And most of them with taxpayer-subsidized coverage.
Insurers, including Blue Cross and Blue Shield of Illinois, the largest health insurer in Illinois with nearly 7 million members, would benefit from the new insurance marketplaces or exchanges that states would have to set up for individuals shopping for insurance, said Morningstar Inc. health care analyst Matthew Coffina. Insurers in the Medicaid market also would benefit from the expansion of the program providing health insurance coverage to the poor.
Given that, a court ruling striking down the law, “We think overall that would be negative for insurers,” Coffina said.
If the court throws out the mandate requiring most Americans to have health insurance or pay a penalty but keeps provisions requiring insurers to offer individual policies to people with pre-existing conditions without charging them more, that “becomes very problematic” for insurers. That’s according to Laszewski. Without the mandate, insurers would have fewer customers, and many people would likely wait until they got sick to get coverage, making them more costly to insurers, he and other experts say.
“When the day is done, the insurance companies will not be in a marketplace [where] they have no hope of profitability,” Laszewski said. “If the insurance companies can’t make money, they will withdraw from the [individual] market … or they will price the insurance so high that nobody can buy it anyway.”
If the court repeals the mandate as well as provisions requiring non-discriminatory coverage for people with pre-existing conditions, that could appear to be a boon for insurance companies.
“They’d have no insurance reform, but the federal government would be spending $50 billion on subsidies for people to buy their products,” he said. “That’s great” for insurers.
But that situation isn’t expected to last long because Congress would likely quickly act to repeal the subsidies, he said.
For insurers, the Court striking down the law wouldn’t necessarily be in their best interest.
They “haven’t been ecstatic about this law because they feel it’s quite imperfect,” said Laszewski. But the industry believes it “can manage within the new world the [law] would bring,” and that the law “can be improved and fixed as we go forward,” he added.
Rejection would mean, “we’d have to start over and have another national health care debate,” he noted. “You could get something a lot worse.”