Obamacare Exchanges' Achilles' Heel

Will Obamacare share the same fate as Achilles?

In Greek mythology, some predicted that Achilles would die young. To prevent this, his mother dipped him in the River Styx to make him invincible. All of Achilles was covered -- except his heel. He later survived many battles, only to meet his end from a poisonous arrow shot into, of course, his heel.

There have also been plenty of premature predictions of the demise of the Affordable Care Act, commonly known as Obamacare. But the legislation has survived a difficult congressional battle, a narrow Supreme Court decision, and at least 41 attempts to derail it. Now that the health insurance exchanges are running, has Obamacare proven its invincibility? Maybe, but an Achilles' heel could exist for the health reform act -- and the exchanges might expose that weakness.

Statue of Achilles. Source: Wikimedia Commons. 

Technical glitches?
President Obama warned in April that there will be "glitches and bumps" as the Affordable Care Act is implemented. He was right.

Only a few weeks ago, insiders involved with the federally run exchanges revealed that the system was miscalculating prices. Days before the scheduled launch of the small business exchanges, Health and Human Services officials announced that online exchanges for small businesses wouldn't be operational until November -- a one-month delay. Many predict widespread glitches will continue as more Americans use the individual exchanges and later use these small business exchanges.

But will technical glitches by themselves be Obamacare's Achilles' heel? Probably not. Americans can sign up for health insurance the old-fashioned way, using paper applications or over the phone, even if the online exchanges totally bomb. 

There's also time to resolve technical issues. While the exchanges launched on October 1, open enrollment extends through the end of March. The first effective date for insurance is January 1. 

Cost?
If the glitches don't doom Obamacare, some think the costs might. But weren't there lots of reports about the premium costs announced by the federal government being less than expected? Yes, but that's comparing the premiums announced for 2014 against what the Congressional Budget Office projected costs to be in 2016

The reality is that health insurance obtained through the Obamacare exchanges might be less or more expensive than what a given individual currently pays depending on several variables, such as age, gender, state of residence, income level, current policy benefits, and more. Some people will pay less. Some will pay more. 

Could this cost issue bring Obamacare down? Again, perhaps but probably not on its own. For every dollar that one American pays more for health insurance, someone else is paying less. There could be plenty of citizens angry over higher costs, but lots of happy ones with subsidized insurance, too. 

Bad memory
All of this leads me to what I think could be the Achilles' heel for the Obamacare exchanges and the whole health reform law itself: human psychology. We humans tend to remember and focus our attention on negatives much more so than we do positives. As Florida State University social psychology professor Roy F. Baumeister and his co-authors wrote in a research paper on this subject: "Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation than good ones."

As the Obamacare exchange kick into gear, most of us will dwell on every glitch and report of someone paying a lot more for insurance than they did in the past. Sure, we'll hear about the good stuff, too. Our brains won't attach as much importance to that information, though. 

It's important to remember that most Americans receive insurance through their employers and won't participate in the exchanges. Their opinions will be formed and reinforced largely by what they see and hear about others' experiences. There probably will be technical glitches. There certainly will be some people upset about their premiums. Those negatives will carry heavier sway than positive reports if the psychologists are right.

Jumping on a bruised heel?
Now, The Motley Fool isn't a psychological journal nor a political website. We serve investors. The question we ask, in light of psychological and political factors, is "How can the individual investor profit?"

There already exists some bipartisan support for overturning the medical device tax implemented with Obamacare. Should the tax be rolled back, Medtronic (NYSE: MDT  ) is one of several medical device makers that could reap rewards. The company reigns as the largest medical technology company in the world, with products ranging from pacemakers to neurostimulators -- devices that currently are taxed more highly than in the past.

More sweeping changes could mean huge changes for multiple industries. However, before anyone gets carried away, we should note another principle of human nature: the tendency to jump to conclusions.

I don't doubt that plenty of negative stories about Obamacare will influence the minds of millions of Americans. However, that doesn't necessarily mean that health reform will be radically changed -- and certainly doesn't mean anything major will happen in the next few years.

Dipping your feet in the water
Probably the smartest moves for investors would be to buy shares of companies that profit from trends that supersede Obamacare or any other future health reform legislation. For example, we know baby boomers are aging. We know that older people tend to use more prescription drugs.

I like Celgene (NASDAQ: CELG  ) in part because it's in a position to capitalize from two of the markets for diseases impacting older individuals -- cancer and arthritis. The biotech counts powerhouse blood cancer drug Revlimid and up-and-coming cancer drug Abraxane in its lineup. It also hopes to gain approval for psoriatic arthritis drug apremilast in the near future.

Americans will need to purchase most of their prescription drugs directly from retail pharmacies. Rite Aid (NYSE: RAD  ) has been on a roll so far in 2013 and could continue those winning ways. The fourth-largest pharmacy chain in the U.S. struggled in recent years but appears to be on the right track these days. Like its larger rivals, Rite Aid should benefit from higher prescription drug use.

And what if Obamacare exchanges and the overall legislation prove successful in the long run? Professor Baumeister stated that many good events can overcome the impact of bad events. To be specific, five good things outweigh one bad. So, if Obamacare's positives are five times as good as the negatives, this theoretical Achilles' heel won't matter. Investors who dip their feet in the water with solid health-care stocks should emerge victorious regardless of what happens.

More Obamacare targets

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Read/Post Comments (12) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 01, 2013, at 2:23 AM, misterfrost wrote:

    200 a month for a plan that covers nothing and takes a lot of income out of the economy. That translates to less spending, less disposable income which means less business for many in the service industry.

    Doing the math here and it seems that all the media shills promoting this abortion should consider the fact they too will soon be out of a job..way to go controlled media at least your masters will be pleased...

  • Report this Comment On October 01, 2013, at 4:32 AM, SSBN620 wrote:

    Forcing Americans to pay out large chunks of pay for cattle-car care is simply unacceptable, but the enormous additional debt from the subsidies will be the biggest problem. The Fed is losing control of interest rates, and the only tool they have left, money printing, will crush our economy with ever increasing inflation. It WILL happen if we don't stand firn and stop it now.

  • Report this Comment On October 01, 2013, at 5:21 AM, redmanrt wrote:

    The ACA's Achilles' heel is the way in which it was passed.

    "President Obama warned in April that there will be "glitches and bumps" as the Affordable Care Act is implemented. He was right."

    Rest assured, the IRS's enforcement mechanisms are ready to go.

  • Report this Comment On October 01, 2013, at 10:56 AM, jmc6237 wrote:

    If one is forced to exchanges.

    you may run into like here in NH

    Only one provider - so much for the promise for

    choices.

    That provider may not allow you to keep your

    doctors or hospital. So much for that promise

  • Report this Comment On October 01, 2013, at 5:04 PM, sf063 wrote:

    Why all the doom and gloom about the ACA, which will likely make health insurance affordable to many who currently are at risk of financial ruin if they develop a serious illness or have a bad car crash? While most of your readers are likely already insured, I doubt that this website would recommend going without it.

    Betting against the ACA, for which large portions of our healthcare system have prepared since it was passed in 2010, is truly a foolish idea.

  • Report this Comment On October 01, 2013, at 5:45 PM, foolishlymeek wrote:

    I tried to sign on to healthcare.gov three times today to see what the site offers. Only delays. No security questions from the drop down "list" - although I was required to answer these "questions." No "live" support - after waiting two hours.

    I never got to see what companies are offering insurance or what the premiums might be.

    I'd say these problems are more than "gliches"!

  • Report this Comment On October 01, 2013, at 7:35 PM, doco177 wrote:

    "Fathom The Hypocrisy Of A Government That Requires Every Citizen To Prove They Are Insured....But Not Everyone Must Prove They Are A Citizen."

    "And Now, Any Of Those Who Refuse, Or Are Unable To Prove They Are Citizens Will Receive FREE Insurance Paid For By Those Who Are Forced To Buy Insurance Because They Are Citizens."

  • Report this Comment On October 02, 2013, at 10:17 AM, Schneidku40 wrote:

    I think SSBN620 has it right. The extra cost to the government, which will ultimately lead to increased taxes, will be the biggest problem with this bill.

    We can't tax fewer and fewer people to subsidize more and more people over time.

  • Report this Comment On October 02, 2013, at 1:39 PM, pondee619 wrote:

    Obama Care might not be such a bad idea. Everyone needs medical insurance as you will not know when you'll get sick or injured. My problem is that those employers who have offered medical insurance can now stop the offer and send their emloyees to the exchanges. Shifting the cost from employer to employee. Stories, I have already heard from friends, who have had their hours cut to stay below the emloyer mandate to rovide coverage, business who have cut staff to stay below the employee numbers. What problem in the past has ever been effectively corrected through Government action?

  • Report this Comment On October 02, 2013, at 3:56 PM, AltReality11 wrote:

    I think Obama may have already signed the death knell for the "Affordable Care Act" in the form that was passed by the Democratic Congress.

    It's no secret that a lot of people have better insurance than that which will be available to the currently uninsured under the ACA. Under ACA citizens must purchase health insurance, with specific exemptions.

    Recently, the rules for Congress and staffers were tweaked. Members of Congress and staff were required to select their health insurance from the new exchange opened Oct. 1. In the past, they chose their coverage from a list of plans available to federal employees. However, government officials recently decided members of Congress will continue to receive a monetary contribution and will be allowed to use it to purchase coverage on the ACA exchanges. Normal citizens aren't allowed to take an employer contribution and apply it to purchase insurance on the exchanges.

    There are trade groups and unions who are next in line.

    Some want in, and some want out. Everyone wants to avoid the excise tax on "Cadillac" coverage, which includes some middle-class union workers. The law currently limits annual contributions to medical Flexible Spending Accounts to $2,500; there was no government limit before.

    The ACA as all the earmarks of our tax code, which is incomprehensible and unfair. It won't take long for Congress and the Administration to do the same to the ACA as they have done for the tax code in this country. Nor will it take long for people to find ways to game the system. The possibilities are endless, including taking advantage of the religious, residency and Indian Tribe exclusions. Of course, appealing to the Congressman or Woman to whom you have made lots of financial support always works in the US.

    That will be what really kills the ACA in it's current form. But as it is a political monument, it will continue to exist for a long time but will be patched and corrupted until it does look like our tax code. I don't think it will take very long.

    .

  • Report this Comment On October 03, 2013, at 12:34 AM, malclave wrote:

    I'm confused here... the article seems to be saying that "Obamacare" and "the Affordable Care Act" are the same thing.

    President Obama is not implementing the Affordable Care Act. As noted above, he has granted an indulgence to members of the nobility and their retinues that is not available to the peasantry.

    Also, there are other elements that he has said will be "delayed". They may or may not be implemented in the future, depending on royal whim.

  • Report this Comment On October 03, 2013, at 1:23 PM, foolishlymeek wrote:

    Obamacare and the Affordable Care Act (or, more specifically, the Patient Protection and Affordable Care Act) ARE the same thing. Obamacare is the nickname for the Affordable Care Act! The Affordable Care Act (Obamacare) was passed into law and upheld by the Supreme Court. Obama is unlawfully not enforcing certain parts of the law (such as the employer mandate) and giving special interest groups exemptions.

    As you said, parts of the law are being ignored at the whim of the King!

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