3 Surprising Repercussions of Obamacare

Ever since the Supreme Court upheld the Patient Protection and Affordable Care Act (nearly in its entirety) last June, we've been examining nearly every facet of the transformative health reform law.

Known also as Obamacare, the PPACA offers a lot of promise to improve the transparency of the health care system, expedite the process of obtaining health insurance, and greatly expanding the number of individuals who have health insurance. As we've also conjectured, it has some potential downfalls, which may include failing to reduce insurance premium prices and placing a larger burden on the middle class.

As the implementation date grows nearer for Obamacare, a set of surprising new repercussions that few saw coming are beginning to rear their head. While not devastating, the following possibilities do have the potential to negatively impact your health care, the health of your portfolio, and the economy as a whole.

1. Hospitals are cutting back on capital expenditures.
The hospital sector has been revered as the biggest winner of all under the new health care reform -- and it's not hard to understand why. The two largest hospital operators in the U.S., HCA Holdings (NYSE: HCA  ) and Tenet Healthcare (NYSE: THC  ) , both lost a significant sum of their revenue to doubtful accounts last year by treating patients who were unable to pay their bill. For HCA, this figure totaled close to $3.8 billion, while it was a more subdued $785 million for Tenet. The individual mandate portion of the PPACA, which requires everyone to carry health insurance, should go a long way to eliminating a good chunk of this doubtful provision.

However, leading up to the implementation of Obamacare, hospitals have a lot of questions to face. Specifically, what happens if uninsured people aren't given the proper training on how to purchase health insurance through the new state-run exchanges, or what happens if the state-run exchanges have technical glitches? The answer to that question is that doubtful accounts may fall by a much smaller sum than expected.

One of my hypotheses until now had been that Obamacare's positive effect on reducing doubtful provisions could allow hospital operators to purchase state-of-the-art equipment that would improve patient care and provide differentiation from other hospitals (i.e., a comparative advantage). We actually may be seeing the opposite of this occurring, with hospitals holstering their spending until a few quarters after the implementation of the PPACA to get a better sense of how many people actually purchased health insurance versus those who are simply choosing to take the end-of-the-year penalty.

This, I proposed earlier this week, could be the reasoning behind weaker sales of the Intuitive Surgical's (NASDAQ: ISRG  ) da Vinci robotic surgical system. The robotic soft tissue surgical device tends to be costlier than standard laparoscopic procedures, but can reduce hospital stays compared to traditional surgery, possibly making it a cheaper overall option for some people. The device itself, though, costs well beyond $1.5 million, which is a cost that many hospitals would rather not endure with so many question marks still surrounding Obamacare. All told, Intuitive sold just 143 of its devices in the U.S. this quarter compared to 150 last year.

2. Insurance companies are being stingier with their approved procedures/medications.
In contrast to the hospital sector, few industries were expected to be hit harder from Obamacare than the insurance industry.

A year ago, the insurance sector was viewed as a rather opaque marketplace where insurers could raise their premiums at will to cover the costs of medical care. Under the new Obamacare, insurers will be required to spend at least 80% of their premium collected on medical care for their members or return the difference. The obvious beneficiary here should be the plan members, who will either receive much needed medical care or get reimbursed.

What we may actually be seeing is the same gun-shy approach to approving medical procedures and medications among insurers as we've seen in the hospital sector. Yet again, the culprit appears to be the uncertainty surrounding whether a large number of currently uninsured people will remain uninsured. WellPoint made a $4.5 billion bet by purchasing AMERIGROUP last year that it would gain a significant number of currently uninsured low income individuals under the proposed Medicaid expansion. If these people don't sign up for health insurance, then WellPoint's purchase will have been for naught.

In order to do their best to conserve cash leading up into the full implementation of the bill, I wouldn't be surprised to see insurers denying or declining to pick up the tab on what they deem overpriced procedures. Not to pick on Intuitive Surgical again, but the company did mention, "a trend by payers toward encouraging conservative management and treatment in outpatient settings." Another potential victim here is Dendreon (NASDAQ: DNDN  ) , whose cellular immunotherapy known as Provenge that's used to treat advanced prostate cancer costs $93,000 annually. By comparison, Johnson & Johnson's Zytiga costs just $5,500 per month ($66,000 annually) and would be the better cost-effective choice for insurers, potentially leaving Provenge out in the cold.

3. The push to part-time employment is a lot bigger than we thought.
It hasn't been a secret that a select few businesses were going to use the scope of the PPACA to their advantage and kick their current and new hires below the 30-hour threshold defined as full-time employment. What's surprising is that many those "few businesses" are turning out to be America's largest employers.

Under the PPACA, businesses of 50 or more employees (defined as medium or large businesses) are required to supply health care options to their employees. While they aren't required to subsidize the cost of their employee's health care premiums, they do run the risk of being fined from $2,000 to $3,000 per employee for each instance of premium costs totaling more than 9.5% of an employee's income. As you can see, for the nation's largest companies that don't already have universal health benefits in place (e.g., Costco), this could be a costly dilemma.

Despite a survey conducted by the Federal Reserve Bank of Minneapolis in March that indicated only 4% of respondents had altered their hiring habits to part-time or cut workers' hours in response to the coming implementation of Obamacare, the repercussions on take-home income and health care availability are huge if this 4% represents any of the U.S.'s largest employers.

Take Wal-Mart (NYSE: WMT  ) , for example, which in 2011 told future employees who work less than 24 per week on average that they'd no longer qualify for health care. In addition, it removed spouses from its insurance plan coverage for those who worked 24 to 33 hours on average per week. You might be thinking, "OK, so this is just Wal-Mart being Wal-Mart!" But remember, prior to Obamacare being passed, Wal-Mart did hire full-time employees. And, most importantly, it is still the No. 1 retail employer in the U.S. with 2.2 million employees!

Don't be fooled by the relatively small number of employers that are cutting hours. Instead, note the size of the employers that say they are cutting hours and you'll understand better why that's a big concern with regard to consumer spending growth and the unemployment picture.

Still have questions about how Obamacare might affect you and your portfolio? Don't worry -- you're not alone. To help prepare investors for the massive changes coming to the American health care system, The Motley Fool created a special free report that makes this complex topic easily understandable. Download "Everything You Need to Know About Obamacare" and discover how the law may impact your taxes, health insurance, and investments. Click here for your free copy today.


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  • Report this Comment On July 13, 2013, at 9:00 PM, emailnodata wrote:

    hmmmmm......

    Other than minimum wage employers, every one is just reallocating a worker's pay when the employer "Pays" healthcare.

    For example, they'd pay a contractor 50k per year, or pay a direct employee 40k per year plus "benefits". Either way, the employer shells out 50 per year.

    Secondly, any employer who cuts hours to keep from helping employees have healthcare??

    Maybe replace "inc." with "do##hebags".

  • Report this Comment On July 13, 2013, at 11:06 PM, G44ca wrote:

    Re: "But remember, prior to Obamacare being passed, Wal-Mart did hire full-time employees."

    What? I suppose we are to believe Wal-Mart no longer hires full-time employees? Right!

  • Report this Comment On July 13, 2013, at 11:26 PM, Corsair3117 wrote:

    "Still have questions about how Obamacare might affect you...." A Multi thousand page law that no Congressman got a chance to actually read before it was ramrodded through and which the majority of states are trying to blindly cope with? Ya think? An out of control administration which uses jack-boots in IRS and "Justice" to punish foes unconstitutionally,,and you still think this might be about health and not Control. Watch it all unfold and, hopefully, eventually unravel. Don't worry, "nodata" your beloved Obamessiah thinks the definition of inc, is do%$&bag, too

  • Report this Comment On July 13, 2013, at 11:38 PM, neocolonialist wrote:

    I like the title "Surprising". Surprising to who? We have just begun to see the devastation and pain that this terrible set of laws is going to unleash on the American people. Well, the American people that aren't current or former U.S. presidents, senators or house members. You can forget about medical innovation unless we get some good folks in office that can dismantle this mess.

  • Report this Comment On July 14, 2013, at 5:29 AM, impeachobama wrote:

    The only ones that will be surprised will be the Politicians in Washington that swallowed the Pelosi invitation to pass a 2000 page Abomination without reading it. And the poor Bastardo Citizens that will sink deeper into the Swamp of Obama's Destruction through no fault of their own.

  • Report this Comment On July 14, 2013, at 5:52 AM, imissgermany wrote:

    I have always been fortunate enough to have had heatlh insurance, whether on active duty or as a civilian. Point #2 makes me very wary. My insurance company, which up until recently was very blase about which doctors/hospitals I could visit, has now started the "circle the wagons" mentality. I'm being told I can see anyone I want, but if that doctor/hospital is not in the newly debuted "Network of Preferred Providers," I am going to have a much bigger co-pay. Come the new year, I think it's only going to get stricter. Hope I'm wrong.

  • Report this Comment On July 14, 2013, at 6:07 AM, JediJones wrote:

    Sorry, but what thinking person is surprised by any of this? The entire Republican party almost never agrees on anything, but they ALL agreed this bill was a monstrosity that would damage individuals and the overall economy. Anyone claiming to be surprised by negative repercussions when the government increases their control and regulation of an industry is indeed a "fool."

  • Report this Comment On July 14, 2013, at 6:28 AM, JimBo1952jb wrote:

    Here's another interesting dilemma. If hospitals are assured of payment because everyone will be required to carry insurance, does that mean that they woud lose their status as a "non-profit" organization? The only reason for that status is because they are required to provide care without regard to a persons ability to pay. If that happens, what effect would it have on the cost of health care? Either way, it does not address the one iue that people are most concerned about: the rising cost of health care. I see it as a boondoggle for the lawyers who represent the insurance companies and the lawyers who work against them: a transfer of wealth from the poorest to the richest.

  • Report this Comment On July 14, 2013, at 7:11 AM, Johninnassau wrote:

    To whom are these "surprising"? Many people predicted these very repercussions.

  • Report this Comment On July 14, 2013, at 7:16 AM, jamalagrin wrote:

    Only the low information voters from and "dumbed down" population who are brainwashed by the liberal media would believe that Obama Care would not be a disaster. Of course, the financially, overburdened, middle class will be carrying the freight for the entire welfare state and those who are here, illegally. Health care will be rationed.

    Obama Care is designed by Obama and crew to tumble the private sector health care system in this country to end up with a single payer government plan which has failed in every country it has been tried, and will fail here, too.

    When the Plan runs out of money, as it will certainly do so, Seniors like myself will be the first ones sacrificed to the gods of anesthesia.

    Under this Administration, communism and socialism are the words of the day. "We, the people," are like lambs going to the slaughter.

  • Report this Comment On July 14, 2013, at 7:42 AM, NowUknow wrote:

    Again I ask, what good is insurance IF you cannot afford the REST of your bill? Example,

    A Dr Visit cost Average $150.00, your now new insurance has a $4,000.00 out of YOUR pocket (i.e. deductible) meaning YOU must pay the first $4,000 before the insurance pays anything. It makes you choose between how bad do I really feel and paying for (food, clothing, shelter).

    And why will the Hospitals still have to provide health care if a person does not have insurance. If you do not have car insurance you go to jail. RIGHT, so go to the ER with no insurance and guess what (you go to JAIL). RIGHT, I KNOW I AM BEING A FOOL, right……….

  • Report this Comment On July 14, 2013, at 7:48 AM, mcigna wrote:

    Our elected president is a fool. All the countries of the world know this. He is a political novice and never should have been elected (twice) , he had no useful experience before getting elected.

    So why are we surprised that he was lead around by a bunch of liberal losers on Obamacare.

    I can't remember the last really useless president we had before Obama as this guy makes Jimmy Carter look like a genius

  • Report this Comment On July 14, 2013, at 7:48 AM, Paulson545 wrote:

    Americans don't care. Americans have become fat lazy and stupid, they want something for nothing ( socialism ) . The media is pro liberalism so Americans are doomed to have an inferior healthcare system that will cost them more.

  • Report this Comment On July 14, 2013, at 8:07 AM, George923 wrote:

    You all actually believe this is about insurance? Think again. This is about destroying the middle class. Obama is a Marxist to the core. To believe anything else is "Foolish". This is one front of a multi-front war.

  • Report this Comment On July 14, 2013, at 8:09 AM, jbuggy1 wrote:

    Perhaps surprising to those who have been living under a rock for the past 3 years, or in complete denial about this joke of a law. There were many who tried in vain to tell us this would happen. Unfortunately the media is culpable in feeding misinformation about this disaster to Americans.

  • Report this Comment On July 14, 2013, at 8:13 AM, kthejoker20 wrote:

    My wife was fired from her full time job and was replaced by a part time who does not have benefits anymore.

    Worst part is that employer also took TARP money.

    Verify it, THE Park Bank, MADISON, WI.

  • Report this Comment On July 14, 2013, at 8:16 AM, hersheymogo wrote:

    United Airlines has started cutting employees. They are "vendoring" out 6 airports. At those airports, all the United employees will loose their jobs in October. United will than hire a company to handle their operations. Service, performance, and safety are going to take a huge hit! Airports are Rochester, NY, Tuscon, Harrisburg, PA, Albany, Grand Rapids, and Cincinnati. This is only the beginning.

  • Report this Comment On July 14, 2013, at 8:24 AM, JackTroy wrote:

    "Surprising" Repercussion #4:

    Doctors now in practice will be leaving the pool of 3rd party payer physicians to practice "fee for service." More and more doctors will refuse Medicaid and Medicare payment. Doctors studying abroad who were going to come the US will go elsewhere to make money.

  • Report this Comment On July 14, 2013, at 8:34 AM, richardraw63 wrote:

    I'm going to go live in the forest until Obama leaves office.Remember, use cash, it's hard to start a fire with credit cards. After the collapse caused by this failure in leadership we will all be living in the forest, don't call me homeless, call me a visionary.

  • Report this Comment On July 14, 2013, at 8:54 AM, gwsjr425 wrote:

    Ummm, these are not "repercussions"....these are "you where warned"

  • Report this Comment On July 14, 2013, at 9:01 AM, DrWuHu wrote:

    As long as health CARE is being administered by health INSURANCE corporations, the health CARE system is going to remain unaffordable and dysfunctional. We are operating collectively under the mistaken assumption that health CARE and health INSURANCE are synonymous. Health INSURANCE is NOT health CARE.

    Health INSURANCE is NOT health CARE. Legalism and bureaucracy shouldn't be confused, (or interfere), with the practice of medicine. As long as we continue to allow INSURANCE to dictate the practice of medicine, we are allowing ourselves to be lead as sheep to the slaughter.

    Want to fix the problem? Outlaw health insurance .

  • Report this Comment On July 14, 2013, at 9:14 AM, khaupt wrote:

    Perhaps your next foolish article on Obamacare should be on the excise taxes and the possible tax breaks. Just think of it, we are taxed on sport fishing equipment, rods/poles, electric outboard motors, bows,arrows shafts, and coal to name a few. This is from IRS publication 510, chapter 5, page 29. Will we then be able to deduct a fishing trip to Alaska (mileage, travel expenses, etc.) and transporting expenses for the coal for the camp fire on our income taxes as medical expenses? Go buy some fishing equipment. It will have a medical excise tax attached to it thanks to Obamacare.

  • Report this Comment On July 14, 2013, at 9:44 AM, JimBo1952jb wrote:

    The biggest problem with Obamcare os that it fails toaddress the core issue of the riing cost of healthcare. As a matter of fact, it does more to facilitate the problem than to alleive it. The only ones who will profit from it are the lawyers who work for or against the insurance companies. (Real surprise therem, since they are the ones who wrote it). It is just another ruse concocted by the government to transfer wealth from the poorest people to the wealthiest.

  • Report this Comment On July 14, 2013, at 9:52 AM, SLTom992 wrote:

    Why are we being subjected to article after article that is somehow finding surprise that Obama-care is working EXACTLY as predicted by it's original detractors?

    In the San Francisco bay area the hospitals are reducing staffs by 20% because of the expected reduction in income due to FIXED reparations for medical work.

    Almost all companies what can operate with part time employees are now moving that way. This will leave more and more workers having to buy health insurance that is expected to double in cost.

    You asked for it, you got it.

  • Report this Comment On July 14, 2013, at 11:08 AM, grumpf52 wrote:

    Obamacare is a horrible law that causes more problems than it solves. If you understand that nothing is free and insurance companies and medical facilities are businesses not charities then it becomes clear that this law really helps only a few people and the bill will be footed by the tax payers.

  • Report this Comment On July 14, 2013, at 11:46 AM, lizfj1 wrote:

    So, when we decipher this, it means that you won't be able to get the procedure you need to save your life, and even if you did, the hospital won't have the equipment needed to do it.

  • Report this Comment On July 14, 2013, at 4:07 PM, doco177 wrote:

    1. Millions are losing the insurance Obama promised they could keep. Because ObamaCare forces employers to offer expensive Cadillac plans but also offers the option of paying a fine for not providing health insurance that can be cheaper than providing it, between seven and twenty million Americans are likely to lose their health insurance coverage according to the Congressional Budget Office. The original estimate was closer to four million.

    2. The cost of healthcare premiums is about to further skyrocket. Premium costs have already exploded, but that is a slow-motion explosion. In the near future, we could see costs double or worse. Naturally, these costs will hit an already burdened middle class hardest.

    3. Lost jobs. Lost jobs.

    The Federal Reserve's March beige book on economic activity noted that businesses "cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff."

    Human resources consulting firm Adecco found that half of the small businesses it surveyed in January either plan to cut their workforce, not hire new workers, or shift to part-time or temporary help because of ObamaCare.

    4. Potential doctor shortages that will mean rationing: The healthcare industry is already a bureaucratic quagmire. ObamaCare is about to add steroids. As the profession becomes tyrannized by government, the talented people currently practicing medicine plan to get out sooner than expected. Who knows how many will choose not to get in. Doctor shortages are what lead to the nightmare known as rationed care.

    5. Somewhere around $800 billion in tax increases will hit America's middle class. This added burden will not only further oppress a middle class already reeling from a drop in wages over the last few years, but could damage the overall economy.

    6. Inflation, the cruelest tax on the poor. When businesses get socked with added costs brought about by higher taxes and burdensome government mandates, they pass those cost along to the consumer in the form of higher prices.

    7. Added bureaucracy. Even those Obama lapdogs over at the Washington Post's Wonk Blog are admitting that applying for health care is about to get more burdensome than the byzantine paperwork involved in buying a home.

    8. To cut costs or to avoid having to provide insurance, workers on the economic margins are already losing hours, which means a lower paycheck. There are a million sad stories in ObamaVille; here are just a few of them.

    9. ObamaCare is projected to add $6.2 TRILLION to a deficit the GAO has already declared "unsustainable." That's "trillion" with a "t".

    10. More taxes than currently estimated are likely to hit because of situations like this one.

    11.Muslims, Amish, Native Americans, Congress are exempt from mandate and penalties under Obamacare that the rest of us have to pay.

    The govt becoming more involved in health care is the reason the costs have increased. So Govt creates a crisis, then provides a solution that comes at the expense of liberty and freedom, costs trillions, and by most accounts won't solve the problem but in fact make it far worse.Corruption, incompetence, disregard of the Constitution, and lying are integral to the way that this country is being run.

    Three years ago, Obama, Democrats, and his media lied to us about cutting the cost of health care, being able to keep our insurance, and not taxing the middle class.

    Today, those lies and what ObamaCare is and will do to the working and middle class are the biggest untold story in America.

    Just refuse obamacare..REFUSE..If only a mere 20% of the over 300 million population of the USA refuse Obamacare the government would be overwhelmed to even think they could penalize or mandate every citizen that refused to participate in the most corrupt and unlawful ways which it was passed that circumvented the constitution of the United States.

  • Report this Comment On July 15, 2013, at 12:03 PM, tiogaman32 wrote:

    Sean, You have misstated the cost of Dendreon's Provenge as $93,000 "annually". The cost of Provenge is a one-time cost of $93,000 which lasts througout the life of the patient. Zytiga costs $66,000 PER YEAR making Provenge a much less costly alternative. Tio

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