Citi has upgraded hospital stocks, with Gary Taylor, Citi analyst and the FMHR traders.
Updated at 7:40 p.m. ET: UnitedHealth Group's plan to continue offering some elements of the Affordable Care Act regardless of the fate of the legislation is a political as well as a business decision.
While people — especially young adults and people suffering from expensive or chronic illnesses — will benefit from the insurance giant's initiative, the company reaps a public relations coup that will increase its costs by as little as one or two percent, one analyst said.
"It makes UHG attractive among employees and, hence, employers," Uwe Reinhardt, professor of economics and public affairs at Princeton University, said via e-mail.
In a statement Monday, UnitedHealth Group said its UnitedHealthcare company will preserve a few popular aspects of the new healthcare law that have already been put into place even if the Supreme Court strikes down all or part of the ACA. It will continue to let young adults stay on their parents' policies until they turn 26, not charge co-pays for some preventative health services and waive lifetime coverage dollar caps, along with provisions related to appeals and policy termination.
"I think the company sees the opportunity to score some political points by standing behind these very popular aspects of the law," said Matthew Coffina, an analyst at Morningstar. Coffina pointed out that since the company is already offering these services as required by law, the costs of providing them has already been incorporated into premium prices.
Later Monday, Humana said it would continue those same provisions, according to Kaiser Health News. Aetna, too, said it would retain the young adult provision, the preventive care benefits and a third-party appeals program. The Aetna announcement did not include a reference to lifetime limits on coverage.
"The protections we are voluntarily extending are good for people’s health, promote broader access to quality care and contribute to helping control rising health care costs," UnitedHealth Group president and CEO Stephen J. Hemsley said in a statement. "These provisions make sense for the people we serve."
It might seem strange that insurance companies — an industry known for aggressive cost-cutting tactics — only are now getting around to realizing the potential savings in services like free diabetes and blood pressure screenings.
"Sheer inertia can explain it," Reinhardt said. "It would be a mistake to assume that private health insurers are particularly visionary or innovative in this regard."
Insurance companies haven't traditionally been motivated to provide this kind of service because it hasn't been demanded by companies. A majority of Americans are still insured through their workplaces, although that number is falling. But since people rarely stay with one employer for their entire careers, there's little economic incentive for a company to make long-term investments in workers' health.
Coffina said the intense political debates about healthcare issues have prompted Americans and insurance companies alike to think more about long-term trends and ramifications. "Reform legislation frames what's expected of these companies and what a minimum level of service is," he said.
The provision allowing young adults to stay on their parents' insurance is particularly popular, and has been widely used. An April poll conducted by the Kaiser Family Foundation found that 71 percent of Americans support the provision, and nonprofit group the Commonwealth Fund calculated that 6.6 million people between the ages of 19 and 25 were able to obtain health insurance as a result.
Some Republican lawmakers — who are unified in their opposition to the health reform law — have conceded that this is a good idea, and it's politically popular enough that rejecting it could be political suicide. Bloomberg reported last week that Rep.Phil Gingrey, R-Ga., co-chair of the GOP Doctors Caucus, called the young-adult provision “a good policy," although the Caucus advocates a "complete repeal" of the Affordable Care Act on its website.
If health insurers expect that lawmakers will require them to provide certain services even if the Supreme Court strikes down the law, preempting that by volunteering compliance is a shrewd maneuver. "It seems like they're trying to get ahead of their competitors," said Igor Volsky, deputy editor of left-leaning blog ThinkProgress.org. "I wouldn't be surprised to see others echo it."
Some other insurers have already weighed in. The CEOs of Aetna and Humana both acknowledged in recent interviews that popular provisions such as young adult coverage might be already too ingrained in the system to roll back, according to the Wall Street Journal.
Even if legislation doesn't force their hand, taking away benefits is an unpalatable choice for insurance companies because it makes them look like the bad guys. "It's going to be very hard, regardless of what happens with the [Supreme Court] decision, for insurance companies to take away benefits," Volsky said. "I think once you grant people certain benefits, it's very difficult to move backwards."