Giant health insurers could see revenue jump under Washington's new health overhaul that will require millions of additional customers to sign up for coverage in the coming years.
But large insurers and Wall Street analysts say the prospect of a revenue bonanza may be tempered by the escalating costs of medical care and by provisions of new legislation that could eat into profits. The extent of the benefits to consumers is also unclear.
The bill approved by the U.S. House on Sunday will require most Americans to buy insurance starting in 2014, with the federal government providing subsidies for many who can't afford new policies.
The measure also will reduce funding for Medicare services, impose taxes on insurance plans and create state exchanges that will expand access to policies for individuals and small businesses.
Insurance industry experts say there is no way to fully gauge the effect because of its extended time frame. Four years from now, they say, Congress and the White House could have new occupants who may try again to reshape the healthcare landscape.
"It's very difficult to have a lot of conviction in what the next five years for this industry is going to look like," said Steve Shubitz, a healthcare analyst with Edward Jones in St. Louis. "We don't have clarity."
An estimated 32 million uninsured Americans will have health coverage under the legislation by the end of this decade, providing a huge new source of revenue for companies. But insurance experts say the new requirement that insurers accept all applicants regardless of preexisting health conditions will drive up medical costs if healthy customers choose to forgo insurance. Those who do will be required to pay annual fines to the government.
"There is no way to tell the impact," said Dave Shove, a senior healthcare analyst at BMO Capital Markets in New York. "The profitability of those [new policyholders] is unknown."
For consumers, other questions remain:
Will sweeping changes in the legislation lead to expanded availability of preventive care services?
Will younger, healthier people see their rates surge as those rates subsidize care for older and more expensive customers?
Will medical costs spiral out of control, as industry leaders predict, without a concerted effort to rein in the fees of doctors, hospitals and drug companies?
Consumer advocates say the legislation will expand policyholder protections by bringing greater accountability to an under-regulated industry.
"If implemented correctly, insurers will have to compete on the basis of cost and quality, rather than on how deftly they deny coverage," said Anthony Wright, executive director of Health Access California, a consumer advocacy coalition. "Now, the business model . . . is to collect premiums from healthy people and avoid covering sick people."
Most of the roughly 200 million Americans who have health coverage receive it through their employers. About 17 million people buy policies on their own in the individual market, where insurers can reject applicants or raise rates because of preexisting health conditions.
The legislation approved Sunday will require insurers to accept all comers regardless of health status. Although industry executives say they support the idea, they add that the reform will work only if all are required to buy insurance -- thus spreading risk and costs.
"Virtually everyone believes that we have a huge number of issues that remain to be addressed," said Jay Gellert, chief executive of Woodland Hills-based Health Net Inc. "If anyone thinks that just by passing this we're going to solve the problems, they are seriously mistaken."
The industry's Washington lobbying arm, America's Health Insurance Plans, has been waging a fierce counteroffensive for months, making the case that reforms in Congress will do little to curb the growth of exorbitant healthcare costs.
The lobbying group said cuts to Medicare Advantage plans could reduce enrollment by one-third in 2019. And it said a new way of factoring age into insurance rates would drive up premiums more than 50% for people under age 30.
The insurance organization ran ads in national newspapers last week criticizing the overhaul for failing to adequately contain costs. Without bolder action, it warned in its "Open Letter to the American People," the country could face a healthcare cost "crisis similar to the financial crisis that has rocked our economy."