Health insurers face new limits and controls under the health care plan President Barack Obama is expected to sign into law today.
But they also could pick up more customers from among the 32 million Americans the plan is projected to provide with either new private or government health plans such as Medicaid.
As home to Tennessee's biggest health insurer and a major claims processor for another national insurer, Chattanooga has a major stake in how health care reform plays out in the marketplace.
Chattanooga-based BlueCross BlueShield of Tennessee and Philadelphia-based Cigna Corp. collectively employ nearly 6,000 employees in Chattanooga. Both companies succeeded in gaining commercial customers in Tennessee last year amid an otherwise down market for such insurance in Tennessee.
But the new health care rules adopted by the U.S. House on Sunday night -- and likely to be approved under a reconciliation bill by the Senate later this week -- will alter the playing field.
"Everything has been on hold while this legislation was debated over the past year, but I think you'll see more activity in the market now," said Jane DuBose, a market analyst for HealthLeaders-InterStudy Research.
Within six months, health insurers will have to extend family coverage to children up to age 26 and won't be able to deny coverage for children with pre-existing conditions. Starting in 2014, insurers will be required to cover adults with pre-existing conditions, who typically cost insurers more in medical claims paid out. Insurers also will face new fees.
But an influx of new healthy customers facing the federal mandate to purchase insurance could offset those losses, said Russ Blakely, an employee benefits consultant in Chattanooga.
"Nobody likes a mandate but technically, without a strong mandate, I could buy insurance on the way to the hospital in the ambulance," he said.
Local brokers are unsure if the penalties for not paying insurance will be enough to convince healthy people to buy coverage. If they don't, premiums could continue to rise as insurers absorb the expense of a sicker population, according to Joanne Denise with Strategic Employee Benefit Service in Chattanooga.
"People think individual rates are high now? Wait until they double or triple," she said.
Winners and losers
Providers of Medicare Advantage plans will lose some of their extra federal funding under the new health care plan. But Medicaid insurers could benefit by the expansion of programs like TennCare.
Amerigroup, the Virginia Beach, Va.-based insurer that is one of three major managed care organizations in TennCare, is expected to be a prime beneficiary of the changes, according to Collins Stewart analyst Brian Wright. Shares in Amerigroup rose by $1.43 per share in trading Monday to $32.82 -- the highest stock price in more than two years.
BlueCross of Tennessee also should benefit as the biggest managed care organization in the state's TennCare program, which is projected to expand by more than 200,000 people as Medicaid-eligibility rules are expanded.
In a prepared statement, BlueCross CEO Vicky Gregg said expanding the number of insured persons should better share the costs of providing health care.
"But we still have concerns that the new law does not adequately address the underlying causes of medical cost increases," she said.
John Sorrow, president of Cigna HealthCare's Mid South Health Plan, said the congressional changes "present both challenges and opportunities" over time. But he doesn't expect any major immediate shakeup in the company's 2,000-employee operations in Chattanooga.
"Our focus is still going to be on improving the health and well-being of the people we serve," he said.