The Supreme Court’s June 28 decision to uphold the Patient Protection and Affordable Care Act (PPACA) has finally put an end to the U.S. healthcare industry’s wait. The epic SCOTUS decision, comprising of 193 pages of opinions & dissensions, has paved the way for U.S. states, insurers, providers and healthcare firms, to get back on course to implement the healthcare law’s numerous decrees over the next couple of years.

On the Affordable Care Act’s most controversial section , the individual mandate clause, the Supreme Court adjudged that the individual health insurance mandate does not pass muster under the Commerce Clause; however, levying a financial penalty as tax, falls within the federal government’s constitutional power to “lay and collect taxes”.

The Urban Institute analyzed that only 6 percent of the entire U.S. population would be required to purchase insurance under the mandate or risk a penalty, as most of the people already have insurance coverage or will get one through government programs such as Medicaid, CHIP etc. However, it suggested that imposing the mandate would help stabilize the small group and non-group insurance markets, the report suggested.

The SCOTUS ruling has brought much relief for the health insurers that were worried about the constitutionality of the individual mandate and the fear that there would be a disproportionately high number of sick people enrolled in health plans, which would inevitably drive up the premium rates. The escalated premium rates could have pushed down the enrollments in health insurance plans, leading to the failure of the health insurance markets – triggering a ‘death spiral’.

The Upside

Big changes are heralded over the next two years in the U.S. healthcare spectrum that are bound to significantly impact & alter the face of the current healthcare industry landscape. Insurers are expected to add millions of new customers. Bloomberg Government in a recent analysis identified that health insurers are likely to gain over $1 trillion in revenue, over the next 8 years, if the Affordable Care Act is deemed constitutional by the government. Now that the Act and its individual mandate clause have been upheld by the Supreme Court, insurers are likely to step into attractive new markets and bring home increased revenues.

The Downside

Beginning 2014, health insurers are liable to pay a hefty “premium tax”, totaling $8 billion; projected to rise to $14.3 billion by 2018 and increase further based on the premium growth trend. The law also imposes restrictions on the amount by which insurers can vary premium rates based on health, age, gender etc. Insurers are mandated to reveal the percentage of premium dollars spent on healthcare and issue rebate amounts, if applicable. Insurers operating in individual & small group markets may experience a reduction in their profit margins owing to such PPACA restrictions. On the contrary, insurers providing Medicaid coverage would continue to benefit from their markets as the Supreme Court has preserved the program’s development.

The Road Ahead

Affordability remains a pivotal issue for the U.S. health insurers. Health plans need to rise up to the expectations of employers & individuals and introduce initiatives to bring down healthcare costs, without negatively impacting the quality of healthcare being administered. Increased collaborations with hospitals, healthcare networks and improvements in healthcare delivery systems may be a few steps in the right direction to rein in escalating healthcare costs, as proposed by some national U.S. insurers.

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