Hospital stocks surged on the view that there would be fewer unpaid bills while some health insurance stocks fell sharply. Consumers will be able to comparison shop for insurance policies in newly created exchanges that will operate similar to popular online travel websites. Insurance companies will have to sell coverage to everyone, regardless of their medical history, and will have to restrict how much they vary premiums based on age. However, the ruling gives insurers millions of relatively healthy, low-cost policyholders. The Court did not uphold the law in its entirety.
The expansion of Medicaid, a joint federal-state insurance program for the poor, was deemed unconstitutional because it required states to expand their coverage or lose all federal funding for Medicaid, not just the additional funds. This, in essence, forced the states to accept the expansion, which is in contravention of their rights. The healthcare sector comprises one-sixth of the U.S. economy, so the decision has important fundamental implications.
Businesses with 50 or more employees are required to offer health insurance to their workers or pay a penalty. All insurance plans are now mandated to cover more preventive services without out-of-pocket costs. This is expected to lead to enhanced private and public sector support for ‘healthy living’ activity. A recent highly publicized example was New York City Mayor Bloomberg seeking a ban on super-size sugary soft drinks.
This could well be only the beginning. America’s (and Canada’s) obesity problem is already draining the healthcare resources of governments and taxpayers. Obesity could be the next hot-button health issue, reminiscent of smoking—coming under strict government regulation and penalties. The ‘sugar’ lobby (which includes all junk food producers, manufacturers and retailers) is frantically working to mitigate this. Disney has announced it will ban junk food ads from its television channels, radio stations and websites starting in 2015. They can’t do it sooner because of long-term advertising contracts. In conjunction with the advertising ban, Disney will reduce the amount of sodium by 25% in its theme parks’ children’s meals. The move is sure to please parents and health officials, but will undoubtedly provoke criticism from the major snack companies. One of the stocks that did well following the Supreme Court announcement was Weight Watchers.
The Supreme Court ruling ensures that healthcare—along with unemployment—will be a keystone issue in the presidential election campaign. Conservatives and libertarians are up in arms about the so-called nanny state. The big surprise was that Chief Justice John Roberts joined the liberal judges in a 5-4 decision to uphold the individual mandate compelling almost all Americans to buy insurance starting in 2014 or pay a penalty. Mr. Roberts, writing for the Court, said Congress had the authority to impose the insurance requirement under its power to levy taxes. Ironically, Justice Roberts was appointed by President George W. Bush and then-Senator Obama voted against his appointment, as did most other Democrats. In another ironic twist, the Democrats have avoided calling the penalty (for not buying health insurance) a tax. But now that the Supreme Court has upheld the individual mandate on the basis of the tax issue, the Republicans are already accusing Obama of having broken his promise not to raise taxes on the middle class. The public is split on the law.
Two components are very popular: the ban on insurers to deny coverage to people with pre-existing conditions and the directive that dependants can stay on their parents’ policies until the age of 26. Feelings run very high on the healthcare issue. The town hall meetings in advance of Obamacare’s passage were highly contentious and divisive, helping to spur the creation of the Tea Party and to drive its success in the 2010 congressional elections. Within an hour of the Court’s ruling, House Majority Leader Eric Cantor scheduled a vote for July 11 for the Republican-led House to repeal the law, officially known as the Affordable Care Act. This will be to no avail, however, because the Democratic-led Senate will not support the repeal. For now, the Affordable Care Act remains law. However, most of its provisions do not come into effect until 2014, so the law could be repealed or meaningfully changed next year, depending on the outcome of the presidential and congressional elections. Unfortunately, the Affordable Care Act, alone, will do little to change the rising trajectory of healthcare costs.
For many Americans, health insurance premiums and co-payments will continue to rise, as more people and more services will be coveredt. Controlling costs under the Act is supposed to come through recommendations by the 15-member Independent Payment Advisory Board—made up of healthcare professionals and representatives for consumers and retirees. But implementing these recommendations is not mandated. Opponents fear their suggestions will lead to rationing and so-called ‘death panels’. Supporters argue that business and government incentives to encourage healthy living and preventive medicine will eventually help rationalize and bring down the health care costs. The Congressional Budget Office concurred with this assertion, but it has yet to be proven. The Bottom Line: The healthcare debate is global and all countries are threatened by the unbearable future burden of public demand for care.
The developed economies face rapidly aging populations that are already stressing the systems. The landmark Supreme Court decision assures that the parts of the law that have already gone into effect will continue, including provisions that close a gap in prescription-drug coverage under Medicare, allow 2.5 million young adults to stay on their parents’ insurance until age 26, and provide free mammograms, colonoscopies and flu shots. The March 2010 enactment of the Affordable Care Act followed decades of attempts to introduce universal healthcare in the U.S. by both Democrats and Republicans. Obama bet his first term on this legislation, which has divided the country along partisan and ideological lines throughout his term of office. The November elections will likely tell if this bet paid off.