Uninsured rates fell under Obamacare, but who's reaping the benefit?

Now that Obamacare has cut the number of uninsured patients, consumers wonder where the cost savings went

Hospitals and health insurers have reaped a financial windfall from the 2014 rollout of the federal health law, even beyond what was expected.

Now, employers and consumers are seeking a share of the Obamacare dividend.

For years, insurance companies and hospitals told Americans that one reason their insurance bills were so high was because they were paying the hidden cost of medical care for the uninsured.

The Affordable Care Act sought to remedy much of that by unleashing the biggest expansion of insurance coverage in half a century. Ten million Americans became newly insured, and federal officials estimate that $5.7 billion in uncompensated care was wiped out this year as hospitals received more paying patients.

Now it's time to share the bounty from Obamacare, said Bill Kramer, director of national health policy at the Pacific Business Group on Health, which represents big employers like Wells Fargo and Chevron.

"Consumers and businesses have been absorbing this cost shift for decades," he said. "Employers need to step up and put pressure on hospitals and health plans. Show us the money."

In a similar vein, consumer groups are questioning why these savings aren't showing up in health insurers' latest rates. By some estimates, the cost shifting in recent years typically has raised the average family premium by $1,000 or more annually.

But there have been benefits for employers and consumers — even though they may not be readily apparent, industry officials say. They point to historically low increases in overall medical spending and affordable premiums in government-run exchanges.

"The dividend is being shared," said Charles Kahn, chief executive of the Federation of American Hospitals, an industry trade group in Washington. "There are a lot of factors indicating the costs to many are coming down or moderating. But all the problems that brought about cost shifting aren't being washed away."

Providers say government reimbursements for patients on Medicare and in particular Medicaid don't always cover their costs. The health law also imposes funding cuts to hospitals.

Health insurers insist they always bargain for the best deal from medical providers, and they say other factors are pushing up costs at the same time. They fault pharmaceutical companies for charging exorbitant amounts for some specialty drugs and worry that a wave of hospital consolidation will drive up prices even further.

"While this cost shifting is decreasing, theoretically that should drive down healthcare costs," said Dr. J. Mario Molina, chief executive of Molina Healthcare Inc., a health insurer based in Long Beach. "People are going to scratch their head and say, 'What happened?'"

Molina's short answer: "It's the drugs. A huge pipeline of new pharmaceuticals is going to push us back into double-digit healthcare inflation."

That hasn't happened yet, and hospital chains and insurers have posted strong results, to the delight of Wall Street.

Profits at HCA Holdings Inc., the largest publicly traded hospital chain, jumped 18% to $1.7 billion for the first nine months of 2014 compared with the same period a year earlier. The Nashville company's shares have soared 53% this year.

Likewise, health insurance stocks have rallied as the federal government guaranteed millions of new customers and spent billions of taxpayer dollars subsidizing their premiums. Insurers are handling much of the Medicaid expansion under state contracts.

Insurance giant Anthem Inc. signed up nearly 800,000 people on Obamacare exchanges across the country. Its shares rose 33% year to date — three times the increase in the broader Standard & Poor's 500 stock index.

The biggest changes have occurred in the 27 states that have expanded Medicaid, the government health insurance program for the poor. HCA reported a 55% decline in uninsured patients and 30% growth in Medicaid business in five states where it operates and where the program was expanded.

Megan Neuburger, a Fitch Ratings analyst who tracks the for-profit hospital industry, said the turnabout has been dramatic.

"I think the Affordable Care Act has been more positive for the hospital industry than analysts had expected or even the industry expected it to be," she said.

Uncompensated care totaled about $50 billion for hospitals last year, studies show. The Obama administration said the federal government has typically covered about 60% of those medical bills.

But the health law anticipated the decrease in bad debt and reduces future government payments to hospitals. The American Hospital Assn. estimates that hospitals have already experienced $122 billion in funding cuts since 2010.

U.S. workers aren't likely to feel much sympathy. Medical costs are taking a bigger bite out of their paychecks while wages are largely stagnant.

Family premiums for an employer health plan rose 73% in the last decade, and workers' share of the bill jumped 93%, according to a new report from the Commonwealth Fund.

On average this year, employers and workers combined spent $16,834 annually for a family health plan.

Dena Mendelsohn, a health policy analyst at Consumers Union in San Francisco, challenged 6% rate increases by Anthem and Blue Shield of California this year in a report to state regulators. She cited, among other issues, their failure to account for the drop in uncompensated care.

"We were puzzled because they didn't factor it in," she said. "The amount of cost shifting should go down."

Insurers say it takes time for these changes to filter through and the effect remains unclear. The rate hikes for more than 1 million individual policyholders take effect next month.

The prospect of financial relief for consumers may vary across the country depending on whether a state expands Medicaid as well as the balance of power between hospitals and health plans locally.

The sterling reputation of some hospitals makes it difficult for insurers to bargain effectively or follow through on the threat to drop them from an insurance network, said Paul Ginsburg, a professor at USC's Schaeffer Center for Health Policy and Economics.

Without outside pressure, he said, the first inclination of many hospitals may be to spend any extra money themselves.

"There are clearly some hospitals that have enormous leverage with insurers," Ginsburg said. "Hospital administrators and their boards see opportunities to fund all these things they haven't been able to do until now."


Twitter: @chadterhune

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