With a full year of Obamacare enrollments now in the books, it's probably safe to say that some of the predictions offered by supporters of the Affordable Care Act came true – the law didn't collapse upon itself and enrollments handily topped projections by more than one million.
On the flipside, some concerns by skeptics of the ACA remain, including some insurers requesting double-digit price hikes for 2015 as well as the possibility that health insurance costs may prove too burdensome for a middle-class that's still on the mend from the recession.
Throughout all of this only one thing is for certain: Predictions were made prior to the Obamacare's implementation, and not all of them were proven true. I stepped out on the limb in April 2013 and offered up my own set of predictions: "5 Ways Obamacare Will Fail" and "5 Ways Obamacare Will Succeed." Last week we took a closer look at my pessimistic view of the health reform law to discover that it was mostly a mixed bag with some of my predictions coming true, others blatantly off, and even more still waiting to be answered.
Today, we're going to turn the tide and revisit my bullish thesis, "5 Ways Obamacare Will Succeed" to determine how accurate or off-base my predictions turned out to be.
Prediction one: It [the ACA] will reduce hospitals' exposure to doubtful accounts.
The basis for this prediction is that mandating citizens to buy insurance should reduce the number of uninsured people in this country. With fewer uninsured people walking through hospitals' doors the prospect of being paid by individuals or insurance companies should increase, meaning doubtful accounts (i.e., uncollectable revenue from uninsured and underinsured patients) should alternatively decline. Fewer doubtful accounts could mean bigger margins and heftier profits for hospital operators.
The verdict: The truth of the matter is that we don't have enough data to surmise whether this will turn out to be true or not as of yet. Better-than-expected enrollment does bode well for hospitals on paper as it should help reduce the number of uninsured persons and reduce uncollected revenue. What really matters, though, is whether or not people actually pay their bills.
According to initial data from WellPoint (NYSE:ANTM), one of the nation's largest insurers, about 90% of its newest members have been paying their premiums, so this would appear to indicate that hospitals are likely in line to see improved margins and a doubtful account reduction. But again, only time will tell if this proves true.
Prediction two: It will bring 16 million previously uninsured Americans under the Medicaid umbrella.
The idea here is that higher taxes on upper-income earners as well as the 2.3% medical device excise tax would allow the Affordable Care Act to expand government-sponsored coverage to a greater number of low-income individuals and families that previously had not qualified for health insurance due to affordability. Having all of these extra people insured would presumably lead to better quality of life, as well as reap potential benefits for insurers who gained government-sponsored members.
The verdict: This turned out to be partially true and partially false. According to the latest update from the Centers for Medicare and Medicaid Services, Medicaid and Children's Health Insurance Program (CHIP) enrollment surged by more than 6 million compared to the three-month average prior to the start of open enrollment in Oct. 2013. Therefore on one accord the ACA did its job of giving lower-income individuals who were previously on the outside looking in the opportunity to be covered by comprehensive health insurance.
However, something I completely negated with my original predictions was that not all states would choose to expand their Medicaid coverage. Roughly half of all U.S. states chose not to expand Medicaid coverage despite the offer for federal aid because these states in question understood that a portion of this federal assistance would slowly be pulled back beginning in 2016. States which didn't expand surmised that the costs associated with covering government-sponsored patients would actually rise over time, and thus opted out. The real losers here are the millions of Medicaid-qualified citizens who just happen to live in a state that chose not to expand, and potentially insurers like Centene (NYSE:CNC) which cater predominantly to government-sponsored members in a number of states that chose not to expand.
Prediction three: It will cap insurers' profits and require them to spend 80% of premium costs on health-care services.
One of the main tenets of the ACA is that it was meant to keep medical costs from soaring, and part of this included curbing insurers from simply raising their premium rates through the roof. With Obamacare requiring that insurers spend at least 80% of their premium take-in on health-care services for members (or refund the difference under 80% to its members), it would ensure that patient quality of care wouldn't be adversely affected by the implementation of this health reform law.
The verdict: Similar to the first prediction this is going to need more time to play out. With the exception of WellPoint which announced that it's making money on its Obamacare enrollees, the majority of insurers are losing money in the early going. This was pretty much to be expected with a number of national insurers sticking to the sidelines during the initial ACA enrollment campaign.
UnitedHealth Group (NYSE:UNH), for instance, pulled out of California, the state which led individual enrollment by a long shot, in May, and it did so in a handful of other states in order to gauge what worked and what didn't before it went in full bore. With a year under its belt we're starting to see UnitedHealth expand into new states (such as Washington and Connecticut), which could signal that profitability from Obamacare enrollments is around the corner for a majority of insurers in 2015. Only in due time when these insurers are profitable from their Obamacare enrollments will we have a better idea if the ACA's medical loss ratio caps are doing their job.
Prediction four: It will expand the benefits of the average health plan.
In addition to mandating that citizens purchase insurance, the ACA introduced beefed-up minimum-benefit requirements that each plan needed to have in order to qualify to be sold on the marketplace exchanges. The idea was to include more comprehensive coverage such as hospitalization, prescription drugs, maternity, and newborn care on all plans in order to establish a minimum level of health coverage expectations and improve patients' quality of care.
The verdict: There's no question that this prediction will be unequivocally true as the ACA requires that new health insurance plans meet the aforementioned 10 key benefits. However, the implementation of these benefits in full will be extended out further than anyone had expected.
One of the unintended consequences of Obamacare is that it wound up cancelling millions of American's insurance plans because they didn't conform to the minimum required health benefits outlined by the ACA. In states that allowed an extension some citizens have been allowed to continue purchasing catastrophic plans that otherwise would no longer qualify under the ACA. Beyond 2016 this will come to an end, but in the meantime non-qualified plans do still exist, though they are limited in number.
Prediction five: It will promote preventative health-care visits and should therefore reduce long-term care costs.
Finally, with more citizens purchasing health insurance and Medicaid coverage expanding, my thesis here was that it could create an increased desire for members to visit their physician for preventative care purposes. These pre-emptive visits could result in a number of diseases and disorders caught early, long before they develop into serious or chronic illnesses and conditions, which could save the health-care system a considerable amount of money over the long term.
The verdict: Like many of the previous predictions, this one is going to need a little more time to play out, although I would surmise at least the first portion of this prediction has a good chance of coming true.
Through the first couple months of the year hospitals haven't specifically noticed a surge preventative and emergency room visits, but these figures also include a record cold spell known as the polar vortex that kept people holed up in their homes. In addition, basically half of all Obamacare enrollments came during the final five weeks, so we really haven't had a good enough gauge of data to determine whether or not this prediction has come true or failed.
What I can say, based on a study from Health Affairs in 2009, is that emergency rooms are a source of healthy margins for hospitals like HCA Holdings (NYSE:HCA), and most industry analysts expect traffic to ERs to surge as some physicians simply refuse to treat Medicaid-covered patients because they view the reimbursement figure as too low. All told, if more people have insurance chances are they will indeed visit their physician or the ER more often. Unfortunately, we're going to need a few quarters before we can say for certain whether preventative visit totals are on the rise.