By Daniel Sholler, University of Pennsylvania
It seems like legislators introduce a new twist or turn to the health care reform debate twice a day, making it difficult for news networks and investors alike to sift through important aspects of the bill. For now, it seems as if the Senate bill stands the only chance at making through Congress. The bill received an added push yesterday, as Rep. Dennis Kucinich of Ohio reversed his previous position and supported what he at first considered legislation that was too weak. This seems to have revived the bill, which appeared to have one foot in the grave as early as a few weeks ago. While making sense of the bill’s wording and provisions is a task better left to political pundits, it will have a few implications in the insurance and medical technology industries if it is passed. Below are a couple of things to keep an eye on as the process moves forward.
Effect on Banks
Several news sources have put forward ideas about how the health care bill would affect other areas of the economy. One such sector I foresee it having an impact on is the banking industry, particularly given the recent push for banking regulation. Much of this results from the tug-of-war between parties. It would undoubtedly be a Democrat victory if the health care bill goes through (how substantial a victory is far less unquestionable). That being said, political momentum could carry over and a financial regulation bill could fly through Congress. However, keep in mind that Republicans will be looking for a victory of their own. Immediately following the passage of the health care bill, pay attention to how Republicans respond. If they adopt a strong stance against financial regulation, investing in the banking industry becomes far less risky as opposed to a situation in which Democrats seem overwhelmingly unified in getting it passed.
Insurance Companies
Throughout the health care debate, I’ve stuck with the idea that health insurance companies are safe from taking a substantial hit due to reform. Heightened support for the Senate bill has scared many people, but I still don’t think insurers’ bottom lines will be heavily impacted by the legislation. Even given newly introduced restrictions and an attempt at lowering premiums, we will be seeing more people insured at premiums that will not be as low as many expect. In addition, many investors are worried about increased risk due to rescission bans. What they fail to realize is that rescission, in the sense that they understand it, has never been and never will be legal. Yes, insurers find ways to cut people from coverage on the basis of fraud—a client lying about preexisting conditions and such—but are not allowed to drop people solely because a new condition arises. The raising of premiums and other tactical approaches can be debated, but this isn’t a big enough issue to be concerned with. Without a public option to take clients and lower premiums, I still believe insurance companies will be profitable.
