Op-Ed: Obamacare brings mixed impact for Puerto Rico

Written by  //  July 2, 2012  //  Biz Views  //  No comments

Author Vicente Feliciano is president of Advantage Business Consulting (Credit: © Mauricio Pascual)

The United States Supreme Court upheld the Affordable Care Act (ACA) as constitutional. It is a major breakthrough for social justice in the United States. It is shameful that in such a rich country, 15 percent of the population doesn’t have health insurance. The implementation of ACA will lead to a much lower rate, in line with the 8 percent prevalent in Puerto Rico

For Puerto Rico, the overall impact is more mixed. There are three main effects.

First, $6 billion in transfers to the “Mi Salud” program — run by the Health Insurance Services Administration, or ASES  — assigned as part of the Law are confirmed. These funds are already being used. In fact, the participation of the federal government in the financing of ASES has gone from approximately a fourth of expenditures to about half of the total. The increase in federal funds has spared the “Mi Salud” program from the fiscal adjustment applied to other Puerto Rico government programs.

It is unclear if this is merely a respite. The fiscal situation in the U.S. could lead to spending cuts that include the scheduled transfers to “Mi Salud.” However, since this is “The” Obama centerpiece legislation, if Obama is reelected, it is unlikely that the health sector faces significant cuts.

Second, ACA establishes spending cuts in the Medicare Advantage program to partly finance the major increases in Medicaid spending. In the case of Puerto Rico, due to the widespread use of the Medicare Advantage program on the island, the spending cuts are particularly severe.

Finally, the new rules restructuring the insurance market apply to Puerto Rico. For example, starting in 2014, insurance companies cannot decline coverage to individuals because of preexisting conditions such as diabetes or arthritis. However, the individual mandate penalizing whoever doesn’t buy insurance is optional for Puerto Rico.

Therefore, barring local legislation to enable a mandate, the insurance market will become destabilized. An individual could forgo medical insurance while he is healthy. The moment he is diagnosed with diabetes or arthritis, he rushes to get insured. This behavior could lead to bankrupt health insurance companies.

A Republican government could repeal ACA in 2013. Nevertheless, to the extent that it remains in the books, it will be the most significant change in the Puerto Rico health sector in 20 years.