Sunny skies don't appear to be in the forecast for Medicaid expansion in the Sunshine State. Florida's legislature ended its regular session on Friday without a deal for expanding the hybrid federal-state health program as called for in the Patient Protection and Affordable Care Act, commonly referred to as Obamacare. The results of this stalemate ripple through the political world but also could impact some businesses. Here's how.
Deal or no deal?
After the U.S. Supreme Court ruled that the Affordable Care Act could not force states to expand Medicaid, many observers concluded that Florida would be among the states that wouldn't go along with the Obama administration's plans. Gov. Rick Scott had been a vocal critic of the legislation, and the state's Republican-controlled legislature seemed unlikely to push for adoption of any part of the controversial law.
However, Scott surprised many in February by announcing his support of expanding Medicaid. His switch came after the state received a federal waiver allowing Florida to enroll Medicaid recipients in private managed-care plans.
The decision by the Obama administration to allow Arkansas to pursue a private option where the "Medicaid expansion" actually didn't expand Medicaid seemed to offer a way for Florida to follow suit. Arkansas' model allows residents who earn up to 133% of the poverty line to purchase private insurance with federal subsidies. Florida state Sen. Joe Negron recently proposed a plan that was similar to the approach adopted in Arkansas.
Although negotiations between Democrats and Republicans in the Florida legislature appeared to be close to a compromise solution at one point, it6 never materialized. As state Senate President Don Gaetz put it, "the shot-clock" ran out for the legislative session. A special session could be called by Scott, but that alternative seems unlikely. However, the issue will probably reemerge in the next legislative session.
Not business as usual
One reason why Medicaid expansion is likely to remain a hot issue is that some Florida businesses want it. Hospitals, in particular, would benefit because Obamacare already took some funding away with the expectation that there would be fewer uninsured patients due to the Medicaid expansion and mandate for individuals to purchase insurance. Without Medicaid expansion, these hospitals could suffer financially.
Large hospital operator Health Management Associates (NYSE:HMA) is based on Naples, Fla. 23 of HMA's total of 71 hospitals are located in the state of Florida.
Governor Scott is a former executive with HCA Holdings (NYSE:HCA). Although HCA is based in Tennesse, it operates more than 70 hospitals and surgery centers throughout Florida.
These two companies, as well as many other hospitals in the state, are represented by the Florida Hospital Association. The organization's staff appeared before a key Senate subcommittee in support of expansion of Medicaid in Florida.
Business support for some form of expansion of coverage to uninsured individuals extends beyond hospitals, though. The Florida Chamber of Commerce threw its weight behind Medicaid expansion -- but only if certain prerequisites are met. Another industry group, Associated Industries of Florida, has also endorsed Medicaid reform, calling "employer subsidization" of the program a "silent job-killer."
On the other hand, some businesses stand to win when it comes to Medicaid no matter what happens. Florida approved a transition of Medicaid to a managed-care system two years ago. The state obtained federal approval for this shift for long-term-care patients but still awaits a decision on the broader Medicaid population. However, a positive decision is ultimately expected.
Florida already announced contracts with seven managed-care organizations, including UnitedHealth Group (NYSE:UNH) and Amerigroup, which was acquired in 2012 by WellPoint (NYSE:ANTM). Medicaid managed care is a big business for both large insurers. UnitedHealth reported $16.4 billion in 2012 revenue from its business unit that handles Medicaid programs. WellPoint doesn't break out its Medicaid revenue separately, but Amerigroup reported more than $6.4 billion in revenue during the first three quarters of 2012, of which a high percentage stemmed from Medicaid.
Whether or not the Obamacare Medicaid expansion happens over time in Florida, these companies should win as the state shifts the program to managed care. Of course, they could profit even more if more Floridians are covered.
In the meantime, expect plenty of behind-the-scenes lobbying by interested parties in the state between now and the beginning of the next legislative session. The weather forecast is cloudy for Obamacare Medicaid expansion now, but sunshine remains a distinct possibility.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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