Supreme Court Upholds Affordable Care Act – What It Means for Healthcare

By on July 5, 2012

Last week, the Supreme Court ruled in favor of upholding President Obama’s Affordable Care Act. The Affordable Care Act originally approved in 2010, with the goal of overhauling the healthcare system, has been the focus a two-year legal battle. The legal challenge primarily involved one aspect of the bill – the individual mandate. The individual mandate requires Americans to purchase health insurance or pay a penalty. The question was whether the US Government had the legal right to institute the mandate under the Constitution.

The new law, scheduled to go into effect January 2014, would enact many changes. Perhaps the most powerful change is that millions more Americans will now become insured. The following provisions are designed to aid Americans acquire health insurance:

  • Americans will be required to purchase health insurance beginning in 2014 or pay a penalty, however there are exemptions.
  • Insurance rates will be subsidized based on income level.
  • Adult children will be able to stay on their parents’ insurance until they are 26 years old.
  • Insurance companies will not be allowed to deny coverage or discriminate based on gender, age, or health status.

Americans, insurance companies, and healthcare product providers will gain and give in the new law. Americans will benefit by being able to become insured at reduced rates, but they will lose their choice of not being insured without penalty.

Insurance companies will benefit by adding millions of new customers and premiums, however as part of the new law they will have to provide more customer protection. They will not be allowed to deny coverage based on pre-existing medical conditions and will not be able to discriminate based on gender, age or health status. In addition, they will be required to pay for all preventative care without collecting any co-pays.

Health care product providers, i.e. drug companies and medical device companies will have access to millions more insured Americans that should mean more potential customers. The hope is that these new customers will increase revenue. Conversely, these companies will have to pay higher user fees during the Food and Drug Administration (FDA) review process and will be required to provide more product rebates. Biopharmaceutical companies will also have to contend with competition from biosimilars, which the act mandates that FDA create an approval pathway for.

Biosimilars, also known as “follow on biologics,” are copies of currently marketed biopharmaceuticals. After a biopharmaceutical’s patent protection and exclusivity has expired, other companies can copy the original product, also called “innovator products”. The goal of the biosimilar industry is to provide a similar product to the original and to make these products available at a reduced cost, a strategy successfully used with generics. Biosimilars have been strongly advocated for by congress because they promise a 25-45% discount off the original product price. The Congressional Budget Office has estimated a savings to public health care programs, including Medicare, of $25 billion dollars over the next 10 years. Some biopharmaceutical firms may suffer losses due to biosimilar competition. To offset any potential losses, a few prominent biopharmaceutical companies, including, Amgen, Pfizer and Novartis have decided to also become involved in the biosimilars industry.

The Affordable Care Act will enact significant changes to the US healthcare system. Now that the Supreme Court has upheld the Act all parties have until January 2014 to put the new plan into action. Are you in favor of the Affordable Care Act? Why or why not?