If millions of Americans drop their healthcare coverage, providers will be forced to bill patients directly and see fewer collections. They also will see more and sicker patients in emergency rooms, already a cost center for hospitals.
Eliminating the individual mandate in the Affordable Care Act would likely result in lower revenue for physicians, hospitals, and health systems while driving patients to more costly treatment options such as emergency departments, an industry insider predicts.
Negotiators on Capitol Hill are trying to settle on a tax bill, but both the versions from the House and Senate would eliminate the portion of the ACA that requires individuals to buy healthcare insurance or face sometimes substantial fines.
If the final bill emerges without preserving the mandate, the healthcare industry should brace for a major revenue loss, says Sean McSweeney, founder and president of medical billing company Apache Health.
According to estimates from the Congressional Budget Office, losing the mandate would result in 13 million fewer insured individuals, which means more billing the patient directly for services rendered, he says.
"While it is not easy to get money out of insurance companies, it is even harder to get it out of patients, with lower average net collection rates," McSweeney says. "We can anticipate a drop in revenue for physicians and hospitals, which could be significant for those who are billing a lot of patients covered under ACA plans."
McSweeney points to the commonly held notion that there is a downward spiral associated with what is called adverse selection in healthcare. The theory is that healthy individuals who are not mandated to purchase insurance will opt out, which leaves a pool of overall sicker individuals left getting health insurance. In order to pay for more services for these, on average, sicker individuals, insurance companies raise rates for remaining consumers.
As rates go up further, the healthiest individuals opt out of insurance and the cycle continues. Ultimately, the sickest people are left and pay the highest rates, while a large portion of the population is uninsured and pays cash or does not pay at all after receiving services.
"One significant implication for revenue cycle management is that as fewer people have insurance and a larger portion of the poor are left uninsured, people are likely to avoid preventative care and general healthcare services that are not acute, and potentially wait until their condition is more severe," McSweeney says. "This results in a larger number of patients shifting their care from outpatient services to the emergency room. Fewer insured patients in the emergency room means that emergency billing, as a whole, will do less insurance company billing and more patient billing."
Hospitals are obligated under EMTALA to provide emergency care even if the patient does not have the ability to pay, so, emergency providers are likely to see an increase in unreimbursed work, McSweeney says.
"Additionally, since urgent care billing is not covered under EMTALA, we will likely see fewer patients going to urgent care, shifting instead to the emergency room," he explains. "Most urgent care facilities have gotten pretty adept at billing for cash patients and charge a simple flat case rate, so this will hurt urgent care providers financially, as well."
The financial drain could be made worse by consumers being unable to afford healthcare insurance even if they are willing to buy it, notes Dan Ehlke, PhD, assistant professor of health policy and management at SUNY-Downstate School of Public Health.
Repealing the individual mandate will leave insurance risk pools older and sicker, which will prompt insurers to further increase premiums across the country for 2019, he notes, and some may drop out of the ACA exchanges altogether.
"This will mean many more bare counties in which there are no plan options available on state exchanges. The individual insurance market could begin to resemble what it did before the ACA, when it was largely residual, and financially out of reach for most Americans," he says. "One potential mitigating factor is the continued presence of tax credits to ease the cost of premiums. That could have the effect of placing a ceiling on the number of younger, healthier Americans who drop coverage, but it is still thought many will still make that decision, in the absence of any requirement to remain insured."
Gregory A. Freeman is a contributing writer for HealthLeaders.