Obamacare Is Sending Hospitals Into The Insurance Business

U.S. hospitals are responding to the Affordable Care Act by moving into the insurance business, which means they are essentially selling policies aimed at paying for their own services.

The ACA requires the establishment of online insurance exchanges -- administered by the states, the federal government or both in a partnership.

The requirement for exchanges is one of many changes being brought on by the ACA, also known as Obamacare. Others include prohibiting lifetime dollar caps on hospital stays and covering certain preventative procedures (like mammograms and colonoscopies) without charging deductibles or co-pays. On the first of the year additional insurance taxes will go into effect hitting high-income earners, including charging a 3.8 percent Medicare tax on unearned income. And at the start of 2014 the insurance mandate goes into effect, charging a penalty for most uninsured individuals, which means more customers in the insurance market.

Hospital networks that have publicly announced intentions to get into the insurance market or are expanding their current limited offerings include Atlanta-based Piedmont Healthcare and WellStar Health; Sutter Health of Sacramento, Calif.; the North Shore-Long Island Jewish Health System of Manhasset, N.Y.; MedStar Health of Columbia, Md., and Indiana University Health.

"We're broadening the reach of our delivery system," Gregory A. Hurst, Piedmont's interim chief operating officer, told the Wall Street Journal in a report Sunday that cited data suggesting about 20 percent of the top hospital systems are looking into providing insurance products.

The move comes as costs for both insurance and the health care it covers have been skyrocketing in recent years for both patients and providers. The largest factor in this price inflation has been the cost of hospital care caused by the general rising cost of health care products, increasing numbers of Medicare and Medicaid patients whose costs are only partially reimbursed by the government, an increase in charity care (providing treatment to those who can never pay off the full bill), an increase in costly advanced treatments, regulatory compliance costs and insurance against malpractice lawsuits.

Whatever can be said about the ACA, one thing is certain: Costs for insurance and for the care it covers have been soaring past many people’s ability to pay for either – even when hospitals offer cash discounts to avoid using health insurance altogether.

Between 1960 and 2010, the cost of health care has risen faster than other costs of living, such as home prices and gasoline, from 5 percent to 18 percent of national gross domestic product, according to data from the California HealthCare Foundation.

Meanwhile, the cost of family insurance plans rose 131 percent between 1999 and 2009, according to data from the Kaiser Family Foundation. In 2010, the per capita expenditure on health care was $8,402, up 72 percent from just a decade earlier. Average annual premiums paid this year were $5,615 for individuals and $15,745 for family plans even before out-of-pocket expenses are included.