For the last several months health care reform has been at the forefront of most political headlines. Although on the surface health care reform appears to be a social issue, the health care industry represents a huge portion of our economy. Health care costs now account for nearly 20 percent of the United States’ economic output, and that number continues to increase at a rapid pace every year. It is estimated that in 2009 total health spending in the US will reach $2.5 trillion.

In the US there are nearly 600,000 companies that comprise the health care industry, including hospitals, physicians, dentists, medical laboratories and ambulatory services. This number doesn’t even take into account one of the biggest players in health care: the insurance companies.

New health care legislation would spell big changes for all of the industries major players, and many organizations are taking measures to prevent any new bills from being passed. As health care legislation has appeared more imminent in recent months, there has been a drastic increase in lobbying against the proposed bills by health insurers and drug manufacturers. Through September of this year, the Pharmaceutical Research and Manufacturers of America—the main trade group of drugmakers—had shelled out roughly $20 million to lobby policy makers to oppose health care reform.

Skepticism about the future of health insurance companies is evident in the stock market, where enthusiasm for insurers’ stock has been lukewarm despite an increase in revenues and operating earnings being reported from many major providers.

“You have all these positives, but you still have that overhang of health care reform,” says Standard & Poor’s equity analyst Phillip Seligman.

The biggest point of contention for insurers in health care reform has been the so-called “public option.” This would essentially be a government-run alternative to private insurance companies that would operate in a manner akin to Medicare. The public option is touted as a way to create competition for private insurance companies and drive down rates and premiums. The public option would be in competition for the 30 million new customers who would require insurance under the proposed bill. As you can imagine, health insurance companies are none too fond of this idea. They claim that having a government subsidized option will create unfair competition and potentially force them out of business.

It might not all be bad for health insurance companies. The new legislation will require a large portion of uninsured people to purchase coverage, many of whom are low-risk individuals. Currently an estimated 40 percent of the 46 million Americans who lack insurance do so by choice; mostly because they are young and healthy. The new plan will require these young, low-risk uninsured individuals to purchase coverage that they don’t want and will never have to use in many cases. Adding these low-risk policies will help drive down premiums and co-pays for higher risk individuals. These benefits for high-risk individuals are evidenced by the $15 billion that the AARP spent lobbying for health care reform from January to September.

As of October 21, the estimated cost of the new health care bill is estimated at $871 billion, but Congress is adamant that the bill not increase the national deficit. The high price tag of the bill is planned to be offset by reductions in doctor’s pay and making a $400 to $500 billion cut to Medicare. There will also be a new tax imposed on those with policy holders with high annual premiums. According to estimates from the Congressional Budget Office, this new tax would raise roughly $200 billion over the next 10 years.

“If we don’t do something, not only is health care going to be in crisis, but the deficit will—we just will not be on a fiscally sustainable path as it relates to the deficit,” White House spokesman Bill Burton said.

One of the annual debates in health care is over cuts to the Medicare program. On January 1 of next year there is expected to be a cut of more than 20 percent to Medicare. A cut this size, doctors say, would force them to refuse service to Medicare patients entirely. It appears that Congress is not prepared to let this happen, but they will have to find a way to compensate for the $245 billion cost that will be incurred over the next 10 years. Because Democrats are determined to not let the new health care bill add to the deficit, they are making efforts to pass the Medicare cuts in separate legislation from other health care reform.

Everyone knows that small businesses are the back bone of the American economy, and there has been concern that new legislation with put strain on these companies. The currently proposed bill would require many businesses to provide coverage for their employees, with fines imposed on institutions that didn’t meet the bills standards for coverage. Many people worry that a mandate of this nature will force many employers to reduce wages and hours to subsidize the new costs of health insurance for employees. There is also the possibility of an individual mandate, which would fine people a few hundred dollars annually if they fail to purchase health care coverage.

As some for of health care reform seems imminent in the coming months, there are still many questions to be answered. The modifications that make it into the final legislation will inevitably transform one of the biggest sectors of our economy.

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