This episode of The Motley Fool's Market Checkup drills down on the hottest headlines and biggest market movers in the health-care sector.
In this video, health-care analysts David Williamson and Max Macaluso discuss one of the potential unintended consequences of Obamacare: the changing dynamics behind employer-sponsored health-care coverage.
Trader Joe's, the popular privately held supermarket, previously applauded for offering coverage to their part-time employees, is reversing course and, instead of coverage, employees will receive a $500 check. Trader Joe's argues that the employees will likely be able to find a similar plan at a similar cost on the Affordable Care Act's freshly minted state-based insurance exchanges.
Of course, the cost is similar if you add in the government subsidies that those low-income employees are likely eligible to receive. As Trader Joe's was followed by Home Depot, this could be the start of a potentially unintended consequence of Obamacare: shifting the cost of providing health care from employers, to the government.
However, there is a broader trend at work, and that is a chance for businesses to shift from a defined benefit to a defined-contribution model for health care. Walgreen's is one of several companies, including Time Warner, that are either putting current employees, or retirees, on private exchanges. They will continue to subsidize coverage, but the private exchanges provide a way to control health-care costs.
Investors should watch any retailers or companies with large retiree benefits that can be changed. Health-cost inflation has been a big headwind, not just to government spending, but also to business spending. If management can unload at least part of that expense without too much pushback, it will.
Follow David on Twitter: @MotleyDavid.
