Friday, July 11, 2014
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Health reform is good for business

Big business could be the biggest loser if the Supreme Court overturns Obamacare. To be more precise, one business in particular faces an enormous risk - the insurance industry.

Health reform is good for business

by Robert Field, J.D., M.P.H., Ph.D.

Big business could be the biggest loser if the Supreme Court overturns Obamacare. To be more precise, one business in particular faces an enormous risk – the insurance industry.

Health insurance companies could lose about $1 trillion in revenue through 2020 if health reform is struck down. That’s according to a new study by Bloomberg Government. The shortfall would equal almost one-tenth of their total expected earnings.

Looked at another way, the loss represents about one-half of a percent of America’s entire gross domestic product over that time period. It is twice as much as the revenue expected to be earned by the five largest banks. 

And most of that $1 trillion would keep moving through the economy. The health reform law requires insurers to spend between 80 and 85 percent of premium dollars on medical expenses. That means they would pay most of the $1 trillion in claims to physicians, hospitals, and other health care providers. Even so, they would still be able to keep about $174 billion for profits and administrative expenses.

What makes health reform such a financial bonanza for the insurance industry - and ultimately for private health care providers? The biggest reason is the subsidies that will help people buy individual coverage through exchanges. Bloomberg estimates the subsidies will amount to $557 billion through 2020. Insurers will also sell more policies to people who pay the full cost of coverage themselves.

The total revenue from selling individual policies through exchanges to both subsidized and self-paying customers could reach $880 billion.

The second reason is health reform’s expansion of Medicaid. Bloomberg estimates the cost of that part of health reform at $669 billion through 2020. Much of the money will go to private insurance companies, which administer the program in many states. Their share of the added Medicaid spending could reach $220 billion.

Some Obamacare opponents still call it a “government takeover” of health care. They could hardly be more mistaken.

Health reform is, in reality, the opposite of a government takeover. It could end up giving private sector health care its biggest boost ever.

And health reform will have another important effect that should not be overlooked. It will improve the health of hundreds of millions of people who would otherwise be unable to afford care. 

A lot is riding on the Supreme Court’s decision, indeed.


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About this blog

Check Up covers major health events in our region and offers everything from personal health advice to an expert look at health reform. Read about some of our bloggers here.

For Inquirer.com. Portions of this blog may also be found in the Inquirer's Sunday Health Section

Michael R. Cohen, R.Ph. President, Institute for Safe Medication Practices
Daniel R. Hoffman, Ph.D. President, Pharmaceutical Business Research Associates
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