Healthcare companies mulling what to do with GOP tax bill benefits
For-profit healthcare companies last week were buzzing about the savings they expect to reap from the Trump administration's sweeping tax overhaul, which reduced the corporate tax rate to 21% from 35%.
Details were sparse on just how much they expect to save due to the lower tax rate—although the Express Scripts CEO said the pharmacy benefit manager would see a $850 million reduction in taxes thanks to the changes. The St. Louis-based PBM's 2016 net income totaled $3.4 billion.
"We will not be sitting on that cash, I can promise you that," Express Scripts CEO Tim Wentworth said at the J.P. Morgan Healthcare Conference in San Francisco last week.
Other companies promised a deeper look at savings when they announce fourth-quarter 2017 financial results in the next month. Payers are already considering what to do with the extra funds, but it's unclear if customers will benefit from those savings in the form of lower insurance premiums.
"We are very pleased for corporate tax reform. It's going to be good for WellCare, and quite frankly, good for our members as well, as some of that does get into quality spending and the benefits that we create to improve the business and members' experience," Andrew Asher, WellCare Health Plans' chief financial officer, said.
Humana CFO Brian Kane said the company is thinking broadly about how it can use the proceeds to make investments that benefit the company, shareholders and employees. He told investors, however, "our first move is not just to say 'we're going to give this back in customer benefits.' " The company will analyze each local market to see where it might improve customer benefits to stay competitive, he said.
And while Molina Healthcare CEO Joseph Zubretsky said the lower tax rate could lead to lower insurance rates, Centene CEO Michael Neidorff argued it wouldn't.
"If you talk to actuaries, they have always priced the product on a pre-tax basis. Rates should be established based on medical trend, risk and risk corridors," he said, adding that savings are more likely to go to research or wellness programs.
Hospitals will also benefit. LifePoint Health CEO Bill Carpenter said the Nashville-based hospital system will reap about $30 million to $35 million from the tax cuts.
Universal Health Services, an investor-owned operator of acute-care and behavioral health hospitals, has a current tax rate of 37% to 38%, which will drop to the low-20% range, its CFO, Steve Filton, said. Those savings will provide the King of Prussia, Pa.-based company with extra cash and boost its earnings per share, he said.
Still, the tax bill also eliminated the individual mandate penalty for not enrolling in health coverage. Most companies agreed that zeroing out that penalty would undermine the stability of the Affordable Care Act exchanges by prompting healthy members to drop their insurance plans, leaving only the sick and highly subsidized consumers in the market.
Getting rid of the penalty "is not a positive thing for the risk pool," Oscar Health CEO Mario Schlosser said in an interview. "But I also don't think it's a fatal thing for the risk pool. We've again seen going into 2018 that there is a contingent of 10 million to 15 million people in this individual market that have been buying health insurance because they want health insurance."
Tara Bannow contributed to this report.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.