You certainly don't have to go far these days to find criticisms of the Patient Protection and Affordable Care Act, which you likely know better by its shorthand as Obamacare.
This sweeping health reform law is targeted at expanding health insurance coverage to millions of previously uninsured people while requiring individuals via the individual mandate to purchase health insurance or face a penalty that is the greater of $95 or 1% of their annual income in 2014. Backlash against the individual mandate penalties, the relatively slow-growing enrollment figures which currently sits at 3.3 million versus a Department of Health and Human Services target of 7 million enrollees by March 31, and ongoing technical glitches with state and federally run marketplace exchanges, have pushed the law's approval rating at or near a new low, depending upon which agency's poll you prefer.
Some critics have postulated that Obamacare's shortcoming is that regulators are not doing enough to court young adults into the fold, while others view the beefed up benefit requirements as too intrusive and are critical of the roughly 6 million policies that were ultimately cancelled on Jan. 1 because of it. Yet Obamacare's missed opportunity could be something completely unrelated to either of these criticisms.
Obamacare's biggest missed opportunity
According to a report released a little over a week ago by The Commonwealth Fund, a private research group that assesses a number of aspects of the health care system, the lack of Hispanic participation in Obamacare could be the law's greatest early stage shortfall.
The Commonwealth Fund's report notes a bevy of startling numbers that represent both the incredible opportunity, and early stage failure, of Obamacare and officials to court uninsured Hispanics. The study notes that at least a third of all Hispanics are currently uninsured. Current RAND predictions over the next three years via the HHS estimate that 5.4 million people will gain insurance through Obamacare.
Specifically, as it relates to Hispanics, The Commonwealth Fund's marketplace survey found that only 49% of Hispanics who are potentially eligible to receive a subsidy are aware of the marketplace in their state, compared to 63% for the national average. Furthermore, by the end of December just 19% of subsidy-eligible Hispanics had shopped for insurance on the marketplace exchanges compared to a national average of 24%.
Four barriers to entry
This lack of Hispanic participation represents a huge opportunity for Obamacare to boost its enrollment, but only if the government first understands what four factors are holdings Hispanics back from enrolling in the first place.
Perhaps the greatest damage being done against signing up even more Hispanics is that only 26 states and the District of Columbia chose to take federal money and expand their Medicaid program. Some of the nation's largest states, including Florida and Texas, which are home to some 14 million Hispanics, will not be able to participate in the Medicaid expansion. That doesn't eliminate the potential that these Hispanic consumers in the remaining 24 states couldn't shop for insurance on the exchanges, but it does make it financially difficult for many of them to afford the insurance, even with a partial subsidy.
Second, the Obama administration, HHS, and Centers of Medicare and Medicaid Services simply aren't doing a good job in reaching out to Hispanics. The Los Angeles Unified School District actually had a unique idea of allowing teachers to educate their students about the PPACA in order for them to go home and tell their parents about the law. Beyond this example, though, awareness of the law has been lacking for Hispanics throughout much of the country.
Third, there's the language barrier, which has only been exacerbated by a number of technical glitches with the Spanish version of Healthcare.gov. The website for Spanish-only speakers, of which there were an estimated 3.7 million who may qualify for Medicaid or some form of subsidy, only went live in December, missing the Oct. 1 deadline when the other state and federal exchanges opened for business, and even missing its end-of-November repair deadline.
Finally, immigration laws pose a visible risk for Hispanics, with the Obama administration deporting a record number of people during his first term according to data from the Pew Research Center, including 410,000 people in 2012 alone! Families that have mixed-statuses (some residents who are legally in this country and others who aren't) may be increasingly unlikely to try and obtain health insurance for fear that undue attention may be brought to them or their family, even if they're deemed eligible for insurance.
Whom this missed opportunity hurts most
You might be under the impression that a lack of Hispanic enrollees is a moot point, but it can come back to have a number of negative consequences on you and your portfolio.
To begin with, the primary purpose of the PPACA is to reduce the number of uninsured citizens in this country. If the HHS and CMS aren't reaching out to Hispanics, then they're leaving a sizable amount of the population uninsured. This means less collectable revenue from premiums for insurers and potentially higher premium costs for you!
This is also a sad scenario for insurers that cater to Medicaid-eligible and low income individuals and families, as it would appear they're being forced to leave a lot of potential revenue on the table. Molina Healthcare (NYSE: MOH), for example, has likely enjoyed robust enrollment figures in California, but could be leaving a lot of enrollees, especially in Florida and Texas, on the table without insurance coverage. The same could be said for Centene (NYSE: CNC), an insurer of predominantly lower-income individuals and families which operates in a number of states that chose not to expand their Medicaid coverage, including Texas.
This is also bad news for a national insurer like WellPoint (NYSE: WLP), which has fared OK thus far. WellPoint gets a bit of a double-whammy here because it purchased Amerigroup for $4.5 billion in 2012, so it could get a larger chunk of the government-sponsored Medicaid market. Obviously if fewer Hispanics are signing up, then WellPoint will not be recognizing its full potential in enrolling Medicaid-eligible members of this group, much like Molina and Centene. However, WellPoint is also focused on adding younger adults to its network, and on average Hispanics as a group are much younger than other racial groups in this country. In other words, insurers need Hispanics to offset the higher costs of treating elderly and terminally ill patients, and if they don't sign up, insurers could struggle to maintain profitability, at least based on their Obamacare enrollments.
Don't forget about the negative effect a lack of Hispanic enrollment will have on our nation's two largest publicly traded hospital providers, HCA Holdings (NYSE: HCA) and Tenet Healthcare (NYSE: THC). HCA and Tenet are counting on currently uninsured people to obtain coverage before the March 31 coverage cutoff deadline, which, in theory, should help reduce the amount of uncollected revenue each posted in the prior year. If fewer people enroll than expected, HCA and Tenet won't see much of a reduction, if any, in their doubtful revenue collection, which may curb expansion plans, any plans to buy newer equipment, and halt any idea of a dividend being paid out to shareholders in the immediate future.
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