The Jan. 1 episode of The Motley Fool's Market Check-Up features Fool health-care analyst David Williamson discussing the biggest stories affecting Big Pharma, biotech stocks, and the health-insurance industry today.
The stock market is closed on the first day of 2014, but the New Year's holiday hasn't stopped Obamacare from going live. The Affordable Care Act has been the law of the land for years, but the most tangible part for millions of Americans will be new insurance coverage. Enrollment on the healthcare.gov marketplace surged in December, and, if also including the Medicaid expansion, roughly 6 million newly insured Americans begin coverage today.
That leads investors to the big question: Is the health-care system ready to handle the Obamacare patient surge, and will any stocks be set to profit?
There will be problems, possibly from insurers having incomplete data on the swarm of new customers, but David is largely inclined to say yes, the system is ready. There is pent-up demand for health-care services, and those with insurance are more likely to use them. This could help hospital stocks, which have been struggling with lower utilization. LifePoint Hospitals in particular could benefit, as Obamacare should cover a particularly large portion of its uninsured mix, but HCA Holdings remains my favorite of the group, given its strong free cash flow generation and dominant market position.
Investors need to pay special attention to the enrollment mix data. The Obama administration says it is coming, but we have yet to see it. While the young 30-somethings are seen as key to making the law function, the driver of hospital growth will be the older customer with pre-existing conditions who makes frequent visits. What is good for the insurers is bad for the hospitals, and vice versa.
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