Will You Be Hit by This Massive Obamacare Side Effect?

This huge side effect of Obamacare appears poised to impact millions of Americans. Here's how you could win or lose.

Feb 23, 2014 at 10:35AM

Obamacare is sort of like a medicine. It left a bad taste in the mouths of many -- at least at the initial launch. Advocates say that it will make plenty of people feel better over time. And then there are the side effects.

One of those side effects made news this past week with the announcement of results from Aon's (NYSE:AON) Health Care Survey of more than 1,230 employers. According to findings from the company's human resources solutions group, Aon Hewitt, fully one-third of employers plan to move their workers to private health exchanges within the next three years. Two-thirds of employers considering changes to their retirement health benefits are thinking about moving retirees to private exchanges.

Cough Syrup

Source: Wikimedia Commons 

What it could mean for you
What is the impact on employees? There is both good and bad news.

Walgreen's decision last September to offer health insurance to employees through Aon Hewitt's Corporate Health Exchange highlighted some of the positives. The pharmacy chain played up the flexibility to workers and their families of personal coverage options to best meet their needs.

That's not all spin, either. Aon Hewitt's 2013 survey of more than 100,000 employees of companies using its private exchange found that nearly 80% thought the health plan they selected offered the greatest value for their needs, and 93% liked being able to choose from multiple health insurers.

There is another angle, though. Walgreen and other companies moving to private health exchanges aren't just doing it to make employees happy. They're adapting to control their costs. The reality is that a key way of accomplishing this goal is to get employees to pay more. Aon Hewitt's Ken Sperling acknowledged several months ago that the amount that workers "will be asked to contribute is expected to grow much faster than the rate of salary increases."

This impending shift to private exchanges could be as dramatic as the move over the past few decades from employer pension plans to individual 401(k) retirement plans. Just as with that big change, the important factor at play is a transition from a defined benefits model to a defined contribution model.

Side effect?
Some would argue that the move to private exchanges preceded enactment of the Affordable Care Act and therefore shouldn't be viewed as a side effect of Obamacare. Walgreen spokesman Michael Polzin seemed to confirm this view last September, with his denial that the company's move to Aon Hewitt's exchange was driven by Obamacare. 

On the other hand, multiple organizations have directly attributed higher health insurance costs to Obamacare. The desire to control higher costs is a prime motivation for employers' moves to private exchanges. As Towers Watson (NASDAQ:TW) senior consultant Sandy Ageloff observed, health reform implementation "is definitely escalating the pace of change" for companies trying new approaches for providing coverage to employees. 

In an interview with Bloomberg, Paul Fronstin, director of health research at the Employee Benefit Research Institute, speculated that some workers could be pushing their employers for more choices after seeing the Obamacare marketplaces for individual insurance. If he is right, movement to private exchanges could certainly be seen as a side effect of the legislation. Even if his take isn't completely on target, Fronstin made a good point.

PricewaterhouseCoopers' Health Research Institute, or HRI, found that most individuals shopping for health insurance on the Obamacare public exchanges had a wider variety of selections than the offerings for many employers. The firm also reported that prices for the individual Obamacare plans compared favorably to -- and in some cases were significantly lower than -- employer health insurance coverage. It's important to note, however, that a key trade-off cited by HRI was restricted provider choice resulting from limited networks on many Obamacare plans.

Prescription for profits
What is perhaps the best news to be found with this side effect of Obamacare? You could make money from it.

With large employers like Walgreen already moving to private exchanges and many more saying they will follow suit, this relatively new model could present a way for smart investors to benefit. Three big players in the growing field of private exchanges include Aon, Towers Watson, and Marsh & McLennan's (NYSE:MMC) Mercer unit.

I expect the private exchange business for all three companies to grow tremendously in the coming years. You couldn't have gone wrong with any of these stocks over the past year. Marsh & McLennan gained 33%. Aon rose nearly 45%. Towers Watson performed best, with a big jump of around 65%. My view is that investors probably wouldn't fare poorly buying any of the three stocks and holding for the long run.

A sea change is happening in the world of health insurance. Obamacare is contributing to and likely accelerating that change. Whether you think the health reform legislation is a tonic for the U.S. health care system or poison for the nation's economy, riding the wave of private exchanges could be a prescription for profits.

How else will Obamacare affect you?
It's not just the side effects of Obamacare that will affect you and your pocketbook. There are plenty of direct effects also. The health reform legislation seems complex, but it doesn't have to be. In only minutes, you can learn the critical facts you need to know in a special free report called "Everything You Need to Know About Obamacare." This free guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.

Keith Speights has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Aon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers