2 Ferns Controversy = Obamacare Success?

United Healthcare (UNH) and Aetna (AET) may benefit from the administration's push to sign up millennials.

Mar 19, 2014 at 5:47PM

The administration reported 800,000 more people signed up for coverage through health-care exchanges so far this month, bringing the total of newly enrolled to 5 million. Despite the surge heading into the final two weeks, the administration is unlikely to hit its pre-launch target of signing up 7 million uninsured Americans in the program's first year.

However, the spike in enrollees this month could prove welcome news for insurers including United Healthcare (NYSE:UNH) and Aetna (NYSE:AET) that are participating in the public exchanges. So far, those insurers have likely been unimpressed by the number of young people signing up for coverage. But that may have changed this month following the President's wide-ranging marketing push that included a visit with Zach Galifianakis on his web show Between Two Ferns.

Winning the younger demographic's attention
President Obama's Between Two Ferns visit clogged Facebook and Twitter feeds, making it one of the most successful pitches to young people so far. The administration reports that in the first 24 hours after airing, the show was the biggest source of new visits to the healthcare.gov website, causing web traffic to the site jump 40% on the first day it aired.

As a result, it may not be a stretch to assume that a good portion of those signing up for coverage last week were in those younger age cohorts. United and Aetna would like that to be the case. Exiting February, only about 10% of the approximately 11 million potential enrollees between 18 and 34 years old have signed up for coverage.

If plans offered by United and Aetna through the exchanges are to be as profitable as intended, they'll need that number to be higher. After all, a larger percentage of healthy, young patients would go a long way to offsetting costs tied to caring for older patients, some of whom had previously been denied coverage due to pre-existing conditions.

Assuming that the surge heading into the deadline for coverage is skewed toward younger people, United and Aetna could see the benefit of their enrollment show up in future medical loss ratios, or MLRs. Those MLRs reflect how much of the premiums insurers collect are paid back out in the form of patient care.

Stalling profit this year?
Diversified large insurers like United and WellPoint (NYSE:ANTM) have approached 2014 cautiously. Both companies have been guiding investors to expect profit to stall this year.

United is guiding for earnings of $5.40 to $5.60 per share in 2014, about even with the $5.50 it made in 2013, and WellPoint expects earnings to be above $8, but that would mean it could end up shy of the $8.20 it earned last year. 

A major source of their concern is likely centered on their inability to accurately model for the composition of enrollees in the Obamacare plans. If the average age of the newly insured is higher than initially modeled, MLRs may be high. If the average age is lower than predicted, the MLR may come in below plan. For investors, the latter would be more welcome given that a lower MLR would provide insurers with a better shot at over-delivering on their tepid profit forecast.

Fool-worthy final thoughts
The most recently released data didn't provide a break out of enrollment by age. So investors will have to wait to see whether new members tilted away from boomers to millennials.

Coming out of February, the trend was clearly improving. The percentage of enrollees aged less than 35 was shy of 25% through early December. That put it substantially below the 38% to 40% hoped for by the administration early on. But that percentage improved to 27% by the end of February.

Since the percentage of young enrollees may have an important impact on United's and Aetna's earnings this year, investors should keep an eye out for the final enrollment numbers. Investors may have been modeling for young enrollees accounting for 25% of the total based on the first few months. If so, a final reading above those levels could be welcome news. Regardless, investors will need to keep an eye on MLR over the next few quarters to see just how big an impact Obamacare is having on their bottom line.

What two ferns didn't tell you about Obamacare
Obamacare 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.

Todd Campbell has no position in any stocks mentioned. He owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd also owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned.

The Motley Fool recommends UnitedHealth Group. It recommends and owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers