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S&P on PPACA: Hospitals and insurers can't both be right

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For-profit health insurers say major medical claims seem to be in line with expectations this year.

For-profit hospital companies say the level of admissions, and the severity of the incoming patients’ problems, seem to be increasing.

Tulip Lim, a credit analyst at Standard & Poor’s Ratings Services, is questioning whether the insurers and the hospitals can both be right about the effect — or lack of effect — the Patient Protection and Affordable Care Act (PPACA) health insurance market changes on use of care.

Starting this year, PPACA has provided grants that many states have used to expand access to Medicaid programs. The law has also led to the birth of the public health insurance exchange system, and it now requires carriers to sell all individual major medical coverage on a guaranteed-issue basis during designated enrollment periods.

Lim has not come to any firm conclusions about whether the insurers or hospitals will prove to be right about use of care, but, in an analysis of PPACA effects, he says health insurers seem to be saying one thing with words and another thing with their prices. ”They continue to price their products for more of an uptick,” Lim says.

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In the short run, Lim says, he thinks PPACA will help increase provider patient volume. In the long run, he thinks the law will hurt providers that are unable to become more cost-efficient and insurers that are too small to get good prices from providers.

“If anything is clear, it’s that pharmaceutical prices will continue to rise, with high-end specialty drug costs causing growing headaches for health care payers,” Lim says.

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