The Supreme Court is set to render its decision on the constitutionality of the Affordable Care Act, aka Obamacare, in the coming days. It's been two years since the bill was signed into law, so it seems prudent to take a look back at the variety of features the law contains.
The act is rather long; you can read it here in its entirety if you're having trouble sleeping. Or you can improve your health by printing it out and using the bound copies as weights for curls and bench presses. I'll focus on the parts that affect companies you might be invested in and ignore the government-specific changes like cracking down on Medicare and Medicaid fraud.
Most of the Affordable Care Act affects health insurers like UnitedHealth Group (NYSE: UNH ) and Aetna. Many of the changes have already gone into effect:
- Coverage for young adults to stay on their parents' insurance until they turn 26.
- Certain preventive services are covered without charging a deductible or copay.
- Preventing insurers from rescinding coverage for errors or technical mistakes on an application after a customer becomes sick.
- The ability to appeal insurance companies' decisions.
- Removal of lifetime limits on essential benefits like hospital stays.
- Insurers must cover pre-existing conditions for children.
- Minimum percentages of premiums that insurers must pay out for services.
- Elimination of increased payments for privately administered Medicare Advantage plans over standard Medicare.
Most of those are fairly minor and can be passed onto customers in the form of higher premiums. The last two definitely cut into insurers' bottom lines.
In the future, assuming the Supreme Court doesn't strike down the entire law, we'll see two big ones that are substantially more costly:
- Annual limits on insurance coverage being phased out starting in 2014.
- No discrimination due to pre-existing conditions for adults starting in 2014.
To help curb the cost, the most controversial part of the law mandates that all individuals have health insurance coverage beginning in 2014 and instills fines for individuals who can afford insurance but choose not to. There are also fines for certain businesses that don't offer health insurance to their employees.
More ways to foot the bill
Medical device makers like Medtronic (NYSE: MDT ) and Boston Scientific (NYSE: BSX ) are set to pay 2.3% tax on medical devices they sell starting in 2013. The House passed a bill repealing the measure this month, but it isn't expected to get through the Senate, so the companies will have to hope for a full repeal by the Supreme Court to get relief from the tax.
Drugmakers like Pfizer (NYSE: PFE ) and Merck (NYSE: MRK ) are also on the hook for some of the cost, but their "tax" isn't as broad. The companies agreed to offer discounts to seniors in the "doughnut hole," the time after Medicare Part D prescription drug coverage is removed before catastrophic coverage kicks in. Seniors were paying 100% of the cost of the drugs in the interim period each year, but with the discounts, the cost for seniors starts at 50% for brand-name medications and drops to just 25% of brand-name costs in 2020.
The Supreme Court releases its decisions when it's ready. The current term is set to end at the end of June, so we should hear shortly. Opinions are generally released on Mondays, but sometimes on Wednesdays or Thursdays as the term winds down. Assuming the opinion isn't handed down tomorrow, Monday appears to be the most likely day for a decision, but the Court has other cases to render opinions on, so the decision could get pushed back to Wednesday or Thursday of next week.
If I were a justice, I'd certainly save the controversial one for last and quickly slip out of town.
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