The Affordable Care Act, passed in 2010, was a huge piece of legislation that touched nearly every part of the healthcare industry. Its cornerstone was to provide insurance to more than 32 million uninsured Americans. And a lot of headway has been made in that area: the Congressional Budget Office recently estimated that about 26 million citizens are newly insured.
But how has the ACA impacted the healthcare industry? An increase in the number of insured patients is bound to make waves in the market. And it has for hospitals and insurers alike.
Hospitals see positive numbers
More than half of the people who are newly insured this year are those that signed up for Medicaid, according to an article in the New York Times. In states that have expanded Medicaid, there has been a boon in patient volume and reduction in self-pay patients and charity-care spending.
An increase in Medicaid patients may not appear to be a windfall for hospitals as it only pays about 16 cents on the dollar in relation to hospital charges, but the money is better than the zero received for charity care or the 2 cents to 3 cents on the dollar hospitals typically receive for bad debt.
The Colorado Hospital Association released a report in June finding that the number of Medicaid patients seen at hospitals has risen by 3% in expansion states, charity care dropped 30% (almost $1 million less per organization) and self-pay was down nearly 2%.
In a new report, the Department of Health and Human Services found the increase in patients has equaled greater volumes of insured patients, but only in states that have expanded Medicaid. According to the report, the number of hospital admissions for Medicaid patients has gone up between 4% and 31% in expansion states.
Research looking at hospital utilization after insurance expansion bears this point. In Oregon, it was estimated that hospital admission rose by 30% and use of emergency room services grew by 40% after expansion.
These expansions will be needed to shield hospitals from cuts the ACA made to Medicaid reimbursement. Disproportionate share hospital funds are scheduled to be cut by $1.2 billion in 2016 and $17.6 billion overall in 2020. HHS has anticipated that hospitals' total uncompensated care will be reduced by $5.7 billion this year due to provisions of the ACA.
Insurer impact
The S&P 500 Health Care Index, which includes insurers, hospitals and drug companies, was up 24% from this same time last year. This index outperformed the overall market this year. And it wasn't just because of provider growth: Two major insurers, UnitedHealth Group and Aetna, have both reported profits above expectations this year.
Aetna recently announced earnings-per-share of $1.79 for the third quarter, well above its estimate of $1.58. The organization has raised earnings expectations for the year after enrollment of 600,000 in exchanges and 500,000 in private plans. Its Medicare Advantage and Medicaid enrollment is also up from the previous year.
UnitedHealth boasted similar growth, also due in large part to increased Medicaid and Medicare Advantage enrollment numbers. The company's net income was $1.6 billion in the third quarter, up from $1.57 billion in Q3 the previous year. Revenues hit $32.76 billion, up almost $2 billion from the same time in 2013.
According to the McKinsey Center for US Health System Reform, more than 50 new insurers have entered the market thus far in 2014.