June 29, 2012

Ruling gives boost to U.S. health care industry

Thursday's Supreme Court decision could provide the greatest benefit to health insurers and hospitals.

The Associated Press

(Continued from page 1)

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A television screen at a trading post on the floor of the New York Stock Exchange headlines the Supreme Court decision on health care Thursday.

The Associated Press

INSURERS

Insurers will get millions of new customers thanks to tax credits that will help middle class people pay for coverage on the individual market, and the state-federal Medicaid program will still expand. The requirement that nearly every American have insurance will compel more people to buy coverage.

But insurers will also face hefty fees and restrictions because of the law. The health insurance sector will pay annual fees starting in 2014. They total $8 billion that first year and then climb in subsequent years.

The law also restricts how much insurers can vary their pricing based on factors such as age and it will require them to cover everyone who applies starting in 2014. The law requires insurers to spend a minimum percentage of the premiums they collect on care and quality improvements or pay rebates to some of their customers.

Citi analyst Carl McDonald said insurers face considerable risks that they will get mostly sick people signing up for coverage in the online health insurance exchanges that begin in a couple of years. The exchanges are like online marketplaces where people can shop for coverage much like they do for airline tickets on travel web sites.

He noted the mandate that requires people to purchase coverage will lead to only a $95 tax penalty at least initially. The analyst said that won't be strong enough to persuade young healthy people to sign up for coverage.

MEDICAL DEVICE MAKERS

For medical device makers, the bad news is that the tax on devices stays. Medical device makers will have to start paying a 2.3 percent tax beginning in January on their sales of devices such as pacemakers and CT scan machines imposed under the overhaul law.

Funtleyder said it was all negative, because he doesn't foresee a big jump in device sales resulting from the ruling: "People who need a pacemaker already were getting one."

But Leerink Swann analyst Richard Newitter wrote that he expects more doctor visits and hospital procedures to increase sales of devices.

One trade group for the industry, the Medical Device Manufacturers Association, said that Congress and the president must repeal the tax, arguing it would make it harder for companies to develop innovative new devices.

"It is clear that this misguided policy has already led to job losses and cuts to research and development," Mark Leahey, the group's president, said in a statement.

 

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