It’s an amazing comeback.

After facing extinction in the run-up to the passage of the Patient Protection And Affordable Care Act, otherwise known as Obamacare, America’s health plans have made an enormous come back with record profits on the horizon. How soon we forget that during the Democratic-controlled Congress the nation’s health plans were on the skids as legislation was put forward to create a national health plan. At first the legislation eliminated private health plans but negotiations led to a compromise that allowed a blend of private and public plans. Finally, in the grand compromise Democrats traded away the public health plan to get support from private health plans and big Pharma.

Today, health plans are flourishing despite the new law’s impact on their traditional way of doing business. Among other things Obamacare caped the percent of premium that plans can spend on administrative cost and profit, it eliminated pre-existing conditions and other forms of rate setting, and even eliminated maximum lifetime expenditure caps. All of which should have neutered the plans’ profits. Yet they are announcing stunning profit forecasts. How?

In the face of all the healthcare reform health plans have a three pronged strategy. First, demand lower rates from healthcare providers, especially hospitals. Two, announce galactic rate increases for small employer insured groups while setting for astronomic increases. Third, sell population health management-like services to hospitals to help them manage the risk of new value-based contracts with Medicare and Commercial ACOs–thus increasing legally allowed profits for the health plans.

All entirely legal, but unanticipated side-effects of the Affordable Care Act–Obamacare. It’s too early to know what the impact of these side-effects will have on the overall success or failure of healthcare reform. But it’s not too early to put a marker down that we can look back upon in 2020 when the authorization for the Obamacare law expires and is up for Congressional re-consideration.

Mark your calendar.


Author Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group had been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based contracts that help sustain those organization’s mission of improving the healthcare of the communities they serve.