Bloomberg News

Obamacare Dividends Pile Up for Hospitals as Patients Pay

July 30, 2014

Emergency Room

Paramedics wheel a patient in an emergency department in this April 30, 2012 file photo in Miami. Photographer: Joe Raedle/Getty Images

Even as Obamacare continues to be attacked by foes and challenged in court, hospital chains and insurers are making more money, more patients using ERs are paying for their care, and the country as a whole is enjoying slower growth in its health-care spending.

HCA Holdings Inc. (HCA:US), the largest for-profit hospital chain, yesterday raised its forecast and reported a 6.6 percent drop in uninsured patients at its 165 hospitals, a reduction that grows to 48 percent in four states that expanded Medicaid, a top initiative of the Patient Protection and Affordable Care Act. WellPoint Inc. (WLP:US), which made the biggest commitment of any publicly traded insurer to the Obamacare markets, raised its guidance today after handily beating analyst estimates for the quarter on rising membership linked to the overhaul.

Taxpayers too may be benefiting from the law approved in 2010. Medicare spending rose by just $1 per beneficiary in 2013, the fourth year in a row that saw a slowdown, the government reported yesterday.

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“Obamacare’s turned out to be quite good for health-care companies,” said Les Funtleyder, a portfolio manager at Esquared asset management, in a telephone interview.

LifePoint Hospitals Inc. (LPNT:US), another for-profit chain, also raises its forecast yesterday while the largest insurer, UnitedHealth Group Inc. (UNH:US), said earlier this month it added 635,000 people to its Medicaid plans and was expanding into two dozen Obamacare exchanges in 2015, from five this year.

Early Life

Still, it’s early in the life of the law, which just began enrolling Americans into insurance plans last year. Longer term, questions remain on whether whether the slowdown seen recently in health-care costs can be definitively tied to Obamacare or whether it was the result of a slow recovery from the 2008-2009 recession.

The Fate of Obamacare

At the same time, investors will be watching to see if WellPoint’s bet on Obamacare pays off, a question largely turning on how healthy the new customers are and whether their medical costs are largely covered by premiums.

Other hurdles remain, as well. Americans’ opinions on the measure may be too hardened for Democrats to see much political benefit this year, or to fight off changes to the act in the future, said Robert Blendon, a professor of health policy at the Harvard School of Public Health.

Recent polls indicate that more Americans remain opposed to the health-care law than support it, although that includes people who think it isn’t liberal enough.

‘Trend Lines’

“In the election campaign Democrats are going to really make a good case that things are not as bad people said, and in fact they’re getting better,” Blendon said in a telephone interview. “If you watch the trend lines, there’s a significant share of people who feel over the long term this isn’t going to work out well and they’re not affected by daily news.”

Costs are a top concern, as insurers and state regulators decide premiums for 2015. If rates rise too much in the future, people who don’t receive U.S. subsidies to help with the bill may drop coverage, undercutting the act’s intent to have everyone insured.

Californians who bought individual insurance plans saw rate increases this year of 22 percent to 88 percent, Dave Jones, the state’s insurance commissioner, reported yesterday.

“For those whose incomes were low enough, there were premium subsidies under the Affordable Care Act,” Jones said in a statement. “But for Californians whose incomes were not low enough, there was likely a major rate increase.”

8 Million Enrollees

About 8 million Americans signed up for private plans offered through the health law’s insurance exchanges by April, and another 6 million were added to Medicaid, the state-federal program for low-income people, according to the Obama administration.

The proportion of the U.S. population without insurance has fallen 3.7 percentage points to 13.4 percent since the end of the 2013, according to Gallup Inc., the lowest rate since the firm began surveys of coverage in 2008.

“We’re now halfway through the first year of expanded coverage under the Affordable Care Act and, so far, our experience has been very positive,” William Carpenter, LifePoint’s chairman and chief executive officer, said in a July 25 conference call. The company operates 100 hospitals, according to data compiled by Bloomberg.

$13 Million Gain

The law contributed as much as $13 million to LifePoint’s earnings in the second quarter, about 40 percent more than the company had expected, he said. People paying bills themselves, a proxy for the uninsured, represented just 4.8 percent of admissions, down from 7.1 percent a year earlier.

Jennifer Lynch, an analyst at BMO Capital Markets Corp. in New York, raised earnings estimates for the company on July 28.

“Benefiting from Obamacare,” Lynch said in a succinct explanation to clients.

HCA hospitals have likewise seen “fairly noticeable reductions in our uninsured volume,” Milton Johnson, the company’s chairman and CEO, told analysts yesterday on a conference call. “We believe we are well positioned to succeed in the health-care reform marketplace.”

About 40 percent of customers with plans from the law’s insurance exchanges previously had no coverage, Bill Rutherford, HCA’s chief financial officer, said on the call. There were 5,500 people with exchange plans admitted to HCA hospitals in the second quarter, and 19,000 visited the company’s emergency departments.

Funtleyder said the hospital chains’ reports may also reflect an improving economy, allowing more people to seek care that they postponed during the recession.

More Quarters

“We may need to see a couple more quarters to parse out who’s going and why,” he said. “If it’s the individually insured who didn’t have insurance going to the hospital, it’s Obamacare. If it’s everybody, it’s probably the economy.”

UnitedHealth, the largest for-profit insurer, said on July 17 it would offer plans in as many as two dozen exchanges in 2015, from five this year. The company also added 635,000 people to its Medicaid plans, growth that Gail Boudreaux, the CEO of United Healthcare, the company’s insurance division, called “tremendous” in a conference call with analysts.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Andrew Pollack


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Companies Mentioned

  • HCA
    (HCA Holdings Inc)
    • $68.47 USD
    • 0.60
    • 0.88%
  • WLP
    (WellPoint Inc)
    • $125.89 USD
    • -0.36
    • -0.29%
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