The 5 States Most Responsible for Obamacare's Early Success

It's no secret that the start of Obamacare's open enrollment period has been less than perfect.

Few people, if any, expected a flawless rollout of the online federal health insurance marketplace, Healthcare.gov, or even the 14 individual state-run exchanges, given how little time was devoted to testing these platforms and how rapidly some of the rules surrounding the Patient Protection and Affordable Care Act changed following July (e.g., the one-year delay of the employer mandate). In addition, previous health reforms such as Medicare Part D have also proven to be rife with problems from the word "Go" that took nearly a year to eradicate.

Source: White House on Flickr.

However, the magnitude of the information technology issues experienced by Healthcare.gov and a few select states, such as Vermont and Oregon, constrained enrollment to a level few anticipated. Through November a mere 364,382 paying Americans had fully enrolled for health insurance, due in large part to technical glitches that made completing their application time consuming, difficult, or just plain impossible.

The winds of change
December, though, ushered in a surge of enrollments as Healthcare.gov's backbone system was finally fixed, thanks to the assistance of a trio of high-tech companies, and the Dec. 24 cutoff to obtain coverage by Jan. 1 coerced nearly 2 million Americans to purchase health insurance.

When all was said and done, combined state and federal enrollments from Oct. 1 through Dec. 28 stood at 2,153,421, yielding a nearly fivefold increase in just one month over the cumulative number of enrollees in the prior two months.

While Obamacare's enrollment success can definitely be traced to the functionality of Healthcare.gov, as well as the urgency created by the Dec. 24 enrollment deadline, certain states have simply done a good job of promoting awareness of the program. Either that, or certain demographic situations exist in these top-performing states that we as investors may able to exploit to our benefit.

Obamacare's five most important states
Let's have a look at the five states that have enrolled the greatest number of people thus far and see what, if any, similarities they might share.

Here are the five states most responsible for Obamacare's early success:

State

# of Individuals That Have Selected a Marketplace Plan

California

498,794

Florida

158,030

New York

156,902

Texas

118,532

North Carolina

107,778

Source: Department of Health and Human Services (link opens PDF).

Probably the first thing that stands out from having previously looked at the most important states to Obamacare based on very early enrollment figures is that we now see a much better balance between states that operate their own individual health exchange and those that use Healthcare.gov as their marketplace. Florida and Texas had made the previous list, but they were were major stragglers behind New York and California. Even though California remains by far the most prominent reason Obamacare will succeed or fail, the importance of Florida, Texas, and North Carolina can't be forgotten, either.

These states combined for 1.04 million of the 2.15 million total enrollees, or 48.3% of all members who've selected a marketplace plan thus far.

Clearly there are some "duh!" factors that we've covered previously that would help explain the high number of enrollments in each of these states.

For one, many of these states have huge populations, and a larger population should proportionately have a higher number of uninsured persons prior to the implementation of Obamacare. In other words, higher population states would be a smart target for most insurance companies looking to add new members.

Traditionally blue states that favored Democratic candidates over the past couple of elections also have delivered strong enrollment figures. It really shouldn't come as a huge surprise that states that offered their support for Obamacare's implementation are the one's seeing the greatest number of people signing up. Although Texas certainly isn't a blue state and Florida is far from a lock to lean toward the Democrats come election time, the sixth through ninth states which are unlisted in our example above (Pennsylvania, Michigan, Washington, and Illinois) definitely had pro-Obamacare tendencies prior to its implementation.

Another factor worth considering here is that a number of these states are in the middle of the pack when it comes to median household income, according to three-year data from the U.S. Census Bureau. With the exception of Washington at No. 10 and North Carolina at No. 40, each of the nine top-enrolling states tend to have a middling level of household income. My thinking here is that states with high median household income are more likely to have had health insurance prior to Obamacare's implementation. Similarly, the lowest-income states probably aren't the top targets of insurers unless they're specifically going after government-sponsored enrollees.

Source: Images Money, Flickr.

"How is this information going to make me money?"
The aforementioned individual state data might seem like nothing more than a random walk, but it could actually be quite useful in helping us discover investment opportunities.

I've said it once and I'll say it again -- WellPoint (NYSE: WLP  ) is completely in the driver's seat when it comes to insurers. Best known for its Blue Cross Blue Shield plans, WellPoint is a strong individual market player in California and New York, and is also looking to take advantage of government-sponsored enrollees in both states.

On the flip side, Aetna (NYSE: AET  ) has delivered more of a mixed message to shareholders by pulling out of California and New York, which together are responsible for 30% of Obamacare's total enrollments to date. It has made smart moves via its recently purchased Coventry Health Care, which filed to sell individual plans in Florida and North Carolina, but obviously shareholders may feel that Aetna walked away with a lot on the table.

Don't forget about the big beneficiaries here outside of the patients, such as hospital operators and drugstores which should see a boost in prescriptions written because of more preventive visits. The two pharmacy giants, Walgreen (NYSE: WAG  ) and CVS Caremark (NYSE: CVS  ) , should see the biggest surge in pharmacy scripts received, but Walgreen gets a slight edge with a presence in all nine of the aforementioned top states, while CVS is missing a presence in Washington. Overall, though, this is probably a negligible difference and I would anticipate both having a record year for prescriptions filled.

Finally, when you consider hospitals as an investment, a name to ponder is Community Health Systems (NYSE: CYH  ) . This provider of general and specialized hospital services would be expected to benefit as more of its treated patients obtain insurance, meaning fewer accounts that go uncollected and more revenue recognition. I specifically chose Community Health because of its presence in seven of the aforementioned nine states, including California, Texas, Florida, and North Carolina.

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Editor's Note: A previous version of this article incorrectly stated that CVS does not have a presence in California, but the author meant to write Washington. The Fool regrets the error.


Read/Post Comments (7) | Recommend This Article (0)

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 January 16, 2014, at 2:04 PM, robertcornwell wrote:

    success????????????????????????

  • Report this Comment On January 16, 2014, at 2:19 PM, BuffMagnum wrote:

    Haha, exactly! If you didn't know any better you would think that Obamacare was not a complete gong show. How could it be going worse?

  • Report this Comment On January 16, 2014, at 2:43 PM, pondee619 wrote:

    "These states combined for... of the 2.15 million total enrollees"

    "There are 48.4 million uninsured Americans — about 18 percent of the population" http://capsules.kaiserhealthnews.org/index.php/2013/03/who-a...

    In what world is enrolling 2.15 Million of the 48.4 million who need to be enrolled considered a success? Have more people enrolled than those who lost their coverage due to obamacare? Is the current "scorecard" at least positive? Are their more or less people insured now than before this plan was enacted?

  • Report this Comment On January 16, 2014, at 3:24 PM, tbroldo wrote:

    "Walgreen gets a slight edge with a presence in all nine of the aforementioned top states, while CVS is missing a presence in California."

    Note to self... Find out who owns Long's Drugs :)

  • Report this Comment On January 16, 2014, at 4:20 PM, Kabbies wrote:

    Sean...do some more research. CVS has 850 stores in California.

  • Report this Comment On January 16, 2014, at 4:31 PM, Hotstock1 wrote:

    CVS has a lot of stores in California. I can get to two of them within five minutes of my home. California's health exchange has been good because the State spent TWO YEARS developing it. You don't crank out software overnight. Most of the time spent building a fighter plane is not metal bending for the fuselage but the software to run all the electronics inside it. That's why no other country can replicate our weaponry.

  • Report this Comment On January 16, 2014, at 4:37 PM, TMFUltraLong wrote:

    Yeah it's Washington not California... My mind was going one way while my hands were going the other. I've asked my editor to make the correction.

    Sean

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