Is Obamacare’s credibility gone?
Regardless of your personal opinion on the merits of Obamacare, the fact of the matter has been that many of the initial promises of the bill haven’t been adhered to thus far.
In February, the Centers for Medicare and Medicaid Services, or CMS, proposed a 2.2% reimbursement rate decrease to Medicare Advantage health-benefit providers. Though a bit steeper than many had expected, the reduction proposal followed the basic expectation that the government was going to reduce its cash disbursements to for-profit health-care business. However, following two months of some 160 lawmakers and insurers lobbying the CMS, it decided in April to reverse its decision and propose a 3.3% increase to Medicare Advantage reimbursement rates! At the time, it was great news for Humana Inc (NYSE:HUM) and Universal American Corporation (NYSE:UAM), which derive about two-thirds and three-quarters of their revenue from Medicare Advantage plans. But, it set an even greater precedence in the sector that health insurers weren’t going to cede their pricing power to the government.
History practically repeated itself just a few weeks later when the CMS reversed its decision yet again on reimbursement rates, this time for acute-care hospital providers like HCA Holdings Inc (NYSE:HCA) and Tenet Healthcare Corp (NYSE:THC). Unlike with Medicare Advantage providers, there wasn’t any lobbying involved, just a mere reversal of opinion to raise reimbursement rates for acute-care providers by 0.8% and 1.1% for outpatient acute-care providers. The initial assessment by the CMS had called for a drop of around 1% in reimbursement rates.
Then came yesterday’s decision to back down from the employer mandate deadline and push it back one year, which multiple news outlets have referred to as more politically motivated than anything else with elections coming up in mid-2014.
One big benefit and a potentially huge problem
There is a chance this move could have benefits to the insurance sector and health-benefit providers like WellPoint, Inc. (NYSE:WLP) in that it gives businesses an extra year to figure out how to operate with a part-time labor force and exempt themselves from the penalties that could be associated with needing to offer health insurance and subsidizing their employees. If medium-to-large businesses choose to reduce hours, it could cause employees in increasing number to seek out insurance plans on the state-run exchanges, ultimately validating the effectiveness of Obamacare and making WellPoint, Inc. (NYSE:WLP) — which purchased AMERIGROUP last year to expand its individual market Medicaid-based member group — look like a genius.
Conversely, separating the effective dates of the individual and employer mandates makes a difficult bill to understand even more complex. More so than that, it could potentially reduce confidence in a bill that registered its second-lowest favorable rating since it was passed, according to the Kaiser Family Foundation’s latest tracking poll. If approval ratings for Obamacare continue to wane, individuals may simply opt to take the penalty rather than sign up for health care, adversely impacting insurers like WellPoint.
The one thing I can tell you is that I’m very eager to see what the next approval rating for Obamacare is according to the Kaiser Family Foundation.
The article Is This News a Crushing Blow to Obamacare’s Credibility? originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends, WellPoint.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
