US health care reform looks to squeeze players up and down the value chain

This summer’s landmark Supreme Court decision to uphold the USA’s Patient Privacy and Affordable Care Act (ACA) will have implications for every stakeholder along the health care value chain. Payers and drug manufacturers will be most affected by the current legislation, and will have to adjust their current policies to fulfill the law’s requirements as well as stay profitable, comments business intelligence provide GlobalData. And Big Pharma must adapt.

Payer survival depends on streamlining SG&A, CMS must regulate spending

As GlobalData’s Global Healthcare Policy Analysis 2012 report explains, in the USA payers, who are made up of mainly health plans, pharmacy benefit managers, and the Center for Medicare and Medicaid Services (CMS), and include insurance companies, look to get squeezed financially in the following years which will profoundly shape the health care landscape. Already, payers have been required to amend their expenditures so that they have a Medical Loss Ratio (MLR) of 80%-85%, meaning that 85% of all expenses must go to reimbursement. This will cause payers to become more streamlined with selling, general and administrative expenses (SG&A) and other administrative processes, as well as create defections from unprofitable markets. Another already implemented requirement is guaranteed enrollment for dependents under the age of 26. This has been a hidden gem for payers because this age group is among the healthiest, causing a large influx of covered lives and revenue without significant associated costs.