What the Health Care Ruling Means for the Insurance Industry – Obamacare Analysis

Last week’s U.S. Supreme Court ruling on the Patient Protection and Affordable Care Act provided insurance companies with a greater degree of certainty regarding health care reform than they have had since the act was first signed into law.

Although legislative and legal challenges to the reforms continue (see updates by Patton Boggs and Littler), insurers must quickly focus on implementing changes mandated by the PPACA (many of which had already begun before the ruling was issued). Law firm Duane Morris:

“… federal and state regulators charged with implementing the ACA have fast-approaching deadlines to meet. No longer faced with the uncertainty of the ACA’s constitutionality, they now have to address complex issues in an abbreviated time frame with existing resources… The health insurance industry should be prepared and formulate strategies to respond to the next series of challenges.”

For your reference, five takeaways for members of the insurance industry:

1. There’s no going back on reforms already begun:

“Requirements under the Health Reform Act that have already been put into motion will continue to apply… Such requirements include: (i) certain restrictions on pre-existing condition exclusions; (ii) the reduction/elimination of lifetime dollar limits and caps on annual limits on essential health benefits; (iii) the restrictions on rescission of coverage; and (iv) the extension of dependent coverage to age 26.” (Akerman Senterfitt)

2. Regulatory oversight will increase:

“At the same time, expect additional regulatory pressure with respect to insurance rates and reimbursement amounts, enhanced anti-fraud enforcement, and, notwithstanding the consolidation encouraged by the ACO regulations, significant new antitrust scrutiny.” (Epstein Becker & Green)

3. Some sectors will encounter continued uncertainty:

“…insurance plans with large footprints in the Medicaid managed care sector face particular uncertainty over future enrollments because it is more likely that certain states will opt not to expand their Medicaid programs in light of the minimized penalty following the Court’s opinion.” (Skadden Arps)

4. Cost control is key:

“PPACA requires insurers to report plan costs for the purpose of calculating the insurers’ medical loss ratio (MLR) (the percentage of insurance premium dollars spent on reimbursement for clinical services and activities to improve health care quality). Large group insurers must spend at least 85 percent of premium dollars on claims and activities to improve health care quality. Individual and small group insurers must spend at least 80 percent of premium dollars on claims and activities to improve health care quality. Beginning in 2012, insurers must provide rebates to enrollees if their medical loss ratio does not meet the minimum standards for a given plan year.” (Ford & Harrison)

5. Hurry up and wait:

“Implementation of health insurance exchanges and other provisions will continue, but delays are very likely, because so many states have yet to reach consensus on exchange design… Industry-specific provisions enacted to finance the expansion of health coverage will remain in effect, but they may be challenged in Congress and in the courts based on the smaller-than-anticipated population of newly- insured individuals.” (Patton Boggs)


Read the updates:

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Find additional legal updates on the Supreme Court Obamacare ruling at JD Supra>>