Source: White House on Flickr.
Following the first week of open enrollment for the Affordable Care Act, better known as Obamacare, the best news for the Department of Health and Human Services is that there really hasn't been a lot of news to speak about. Compared to the first two months of last year's open enrollment period, where problems with the architecture behind the federally run Healthcare.gov and a number of individual states such as Oregon, Hawaii, and Vermont, prevented people from signing up for health insurance, the start this year has been largely uneventful.
Uneventful doesn't mean without challenges
However, this doesn't mean, in any way, that Obamacare is going to have a cakewalk in 2015 with regard to enrolling new members. In fact, in many ways, this is going to be an even more challenging year than last year for the online exchanges, as well as insurers.
For starters, the health exchanges have to incorporate not only individual plan changes and more insurers on their exchanges -- the number of insurers increased by roughly 25% this year according to the HHS -- but they have to account for small and large businesses that will be using the exchange for the first time. This added complication fell into the lap of Accenture (ACN -1.04%) this year, but it will have to prove it's up to the challenge before the government will renew its contract for another year.
Source: Healthcare.gov.
In addition, the enrollment period is just half the length of 2014. At just three months -- Nov. 15, 2014 to Feb. 15, 2015 -- consumers will have to squeeze their health plan research into a tighter window, and insurers, as well as exchange administrators, will need to get their message out in an expedited and targeted fashion.
Also, insurers have to walk a tightrope of ensuring that they bring in enough new members to boost their profitability, while also placing an adequate amount of attention on retaining existing members picked up during last year's enrollment period. I've actually opined that national insurers like UnitedHealth Group (UNH 0.23%) and Assurant (AIZ 0.42%), which largely sat on the sidelines last year, may have a nice edge this year, as most of the sicker individuals have already enrolled, leaving them with a more favorable mix of still uninsured Americans. Because UnitedHealth and Assurant participated in four and zero state marketplaces, respectively, last year, they may be able to stand out in a number of states this year as the "insurer that didn't raise its prices."
But Obamacare will be dealing with an even tougher challenge as highlighted by the release of approval data earlier this week by Gallup.
This Obamacare statistic will take on increased importance this year
Based on Gallup's data as of November, just 37% of respondents approve of the Affordable Care Act, with 56% disapproving of the healthcare reform law. The 37% approval of the ACA represented a new Gallup poll low, while disapproval ticked to a new Gallup poll high.
Source: Flickr user Jim Simonson.
On the surface, this might seem like more of the same. Opposition to Obamacare has been heightened since it was first signed into law in 2010. Per Gallup's polls, those who approved of the law have outnumbered those who disapproved of it just one time, in Dec. 2012.
The Kaiser Family Foundation's Health Tracking Poll, which is released on a somewhat regular basis, mirrors Gallup's findings with those who view Obamacare as unfavorable regularly outnumbering those who have a favorable view of the law. Therefore, with this negative sentiment already built in, the implication is that further consumer negativity is unlikely to sway total enrollment, because the individual mandate penalties provide enough of an impetus to get covered regardless of how consumers feel about the ACA.
Yet, this time around, things could be different. Don't forget that Republicans now have full control of Congress following midterm elections, which means that, while a full repeal of Obamacare is highly unlikely, sweeping reforms of the healthcare law may very well lead to change if consumer sentiment continues to swing to record lows.
S-ICD System implant. Source: Boston Scientific.
For example, many Republicans -- and even a few Democrats -- have long had an issue with the ACA's medical device excise tax of 2.3% imposed on the total sales of medical device and diagnostic equipment developed in the U.S. The revenue from this tax is designed to generate funds to help pay for the Medicaid expansion in what currently amounts to 28 states.
The concern has been that a tax on medical devices is akin to taxing innovation, which may wind up driving research and development, as well as jobs, overseas. Though no medical device company has specifically alluded to the medical device excise tax as a job killer, Boston Scientific (BSX 5.68%) in 2011 announced a $150 million investment in China meant to create around 1,200-1,400 jobs, while also announcing its intentions to pare 1,000 jobs worldwide. Were this aspect of the ACA removed, I doubt you'd get many, if any, complaints from medical device makers who'd see their profits boosted slightly.
We may also see Congress take exception with the individual mandate -- the actionable component of the ACA that penalizes Americans for not getting health insurance. In 2015 this penalty is set to jump to the greater of $325 or 2% of their annual income. If the individual mandate were withdrawn, it may not be crippling for Obamacare or its enrollment, but it could be very difficult for insurers to maintain profitability because the individual mandate is one of the primary factors responsible for encouraging young adults to enroll. Young adults are often healthy, and their premiums are needed to help offset the higher costs associated with treating sick and/or elderly people.
My suggestion for investors is to keep a watchful eye on these approval ratings during the coming months, as they could be a big factor that could sway the new Republican-led Congress to push for Obamacare reforms sooner than later.
