The nation’s big insurers are spending millions to carry out President Barack Obama’s health care overhaul even though there’s a chance the wide-reaching law won’t survive Supreme Court scrutiny.
It’s not that health insurers want to bet big that the court will uphold the Affordable Care Act. It’s that they can’t afford not to. It will take at least several months and lots of resources for insurers to prepare to implement key elements of the law, which includes a controversial requirement that most Americans have health insurance by 2014.
WellPoint Inc., the nation’s second-largest health insurer with 34 million members, has said it will spend $100 million this year on technology upgrades to meet the law’s requirements. Aetna Inc., third-largest U.S. health insurer with more than 18 million members, says it expects to spend $50 million this year in part to upgrade software and computers.
Even smaller insurers like Blue Cross Blue Shield of Michigan, a private company with 4 million members, are spending big. This year, the company, which employs 7,000 people, plans to add about 100 employees and spend nearly $20 million.
The law calls for big changes in the number of people receiving coverage, what must be covered and who pays for it, so insurers that don’t prepare until after the court’s ruling, expected in late June, will run short on time, said Kirk Roy, vice president of national health reform with Blue Cross Blue Shield of Michigan.
“Waiting is too big a business risk for any insurer,” said Roy, who was promoted to his current job shortly after the overhaul became law in 2010.
The Supreme Court will hear arguments over the law for three days starting Monday. Among other options, the justices could uphold the law, strike it down completely or get rid of some provisions.
Insurers will be paying particular attention to arguments over two key provisions. One is the so-called individual mandate that requires most people to carry health insurance by 2014 or pay penalties. Of equally high interest is the requirement that insurers cover everyone who applies even if they have a pre-existing condition, like diabetes, which can produce high medical costs.
The two mandates are important cogs in the law’s push to expand coverage through health insurance exchanges set up by federal and state regulators. These exchanges will be mostly online marketplaces, where individuals and small business employees can go to comparison shop for insurance policies. Insurers are spending money to figure out how to set prices for their coverage on these exchanges, which will vary by state and require changes like the inclusion of subsidies to help people pay for coverage.
Much of the money insurers are spending is paying for a close look at how to set premiums high enough to cover the expected increase in claims from people with pre-existing diseases, but not so high that healthy customers are scared off. That includes research into how many people with chronic conditions will need expensive prescriptions or how their customers will use health care.