Does This Latest Obamacare Figure Surprise You?

You could certainly say it's been a tale of two worlds between the majority of 14 state-run health exchanges and the federally run health exchange, Healthcare.gov, since everything went live on Oct. 1.

Let's be clear that state-run exchanges have not been perfect -- even for the states that have seen the biggest number of enrollments so far. California, the state most important to Obamacare meeting its enrollment target in 2014 of 7 million newly insured people, has had numerous technical issues that have prevented users from creating an account, the first step in the process needed before you can obtain an accurate quote. Even my home state of Washington dealt with a series of server overloads within the first couple of days, which derailed or delayed some people from signing up for health insurance.

However, all things considered, the personalization and differentiation of each state-run exchange has made fixing them easier, and the assumption based on early figures is that enrollment on state exchanges is cumulatively equal to or possibly even higher than that of the federal exchange.

The federally run exchanges, though, have been nothing short of the administration's worst nightmare. What many had figured was nothing more than overloaded servers after the first couple of days has turned out to be an architectural disaster with no easy fix. The administration, according to the USA Today, has begun reaching outside its list of contractors and is extending an offer to Verizon (VZ 1.12%) to come help diagnose Healthcare.gov's many problems. The move makes sense given Verizon's networking expertise when it comes to integrating data across the nation, but I have my doubts as to whether Verizon alone can solve what appear to be serious problems for Healthcare.gov.

Compounding the problems associated with the opening of Obamacare's health exchanges was the 16-day government shutdown precipitated by, among other things, a political spat over the medical device excise tax between Democrats and Republicans.

Source: White House on Flickr.

I bet you didn't see this coming
You could certainly argue that the launch of Healthcare.gov couldn't have possibly gone worse -- yet here's the real shock: Sentiment toward Obamacare is actually improving.

According to data gathered by The Huffington Post from seven separate polls conducted recently, six of them demonstrate that the number of people polled who view Obamacare favorably is improving. Here's a quick snapshot of the data Huffington Post aggregated to the generalized question of whether respondents approved of the health reform law known as Obamacare:

Source: The Huffington Post. Numbers may not add to 100% due to rounding and other options such as "no opinion" or "refused to answer." 

With the exception of Pew Research's poll, which saw positive sentiment toward Obamacare decline by 1%, respondents in the remaining six polls demonstrated more favorability toward the health reform law. Similarly, negativity surround the law increased in only one poll (Gallup's), while remaining constant in two others and dropping in the remaining four.

Let's have a look at some of the factors that could be influencing this sentiment shift and see how that could affect your portfolio.

Why has sentiment for Obamacare improved?
We can't avoid one of the obvious factors here, which is political. When it comes to investing, we often like to avoid politics if at all possible because it rarely has any long-term bearing on our investing thesis. However, with the Republican Party receiving a good amount of public backlash for the length of the government shutdown, respondents in the latest poll appear to be siding less with Republicans and have taken a more favorable view of Obamacare.

Another factor likely playing into Obamacare's approval rating is growing understanding of the law. As we saw just weeks before the health exchanges opened to the public, there were an enormous number of polled respondents who had little to no knowledge of the law or how it would affect them. I suspect this figure is still very high, but the ongoing press (whether good or bad) that Obamacare merits is helping to improve consumer education. As evidence to this, I would point to the seven polls above. In five of the seven, the number of positive or negative views as an aggregate has grown with exception of the Pew Research and Rasmussen Reports poll. To me, this signals that respondents are more opinionated, and therefore more informed than before.

The end of speculation and the move into reality is another strong factor that can't be overlooked. Prior to the exchange rollout, there was a tug-of-war between optimists and pessimists as to what would actually happen. Now -- with 25 days under our belt of live enrollment activity -- while the results haven't been optimal, there are roughly a half-million people or more who have been able to submit their application for health insurance. Seeing the concrete results of years of reform is a strong action that's beginning to sway consumer sentiment.

What does this mean for your portfolio?
The clear beneficiary to an improving approval scenario would be insurers like UnitedHealth Group (UNH +0.53%) that would be in line to see more members eager to sign up for health insurance. Understandably adverse selection should see those people who are currently sick or have preexisting conditions signing up first and boosting insurers' expenses, but over the long run this could be great news for a company like UnitedHealth. Let's remember that UnitedHealth decided to keep its nose out of many of the individual insurance markets until at least 2015, so improving sentiment would certainly be important to the company relative to some of its peers which dove into more than a dozen individual health exchanges.

Hospital operators like Tenet Healthcare (THC +1.14%) would see benefits to growing optimism surrounding the Patient Protection and Affordable Care Act as well. Each year, hospitals like Tenet provide emergency care to those in need, and each year a significant number of those patients have no insurance or are unable to pay their bill. Last year, Tenet wrote off $785 million in revenue as uncollectable because of services rendered to uninsured or underinsured persons. A more favorable view of the ACA should portend more signups and fewer instances of nonpayment moving forward, which ultimately adds to Tenet's bottom line.

This is also a potential boost for the entire pharmacy-benefits and drug delivery business. Pharmacy operator Walgreen (WAG +0.00%) has been a very vocal promoter of Obamacare for months since it understands that an influx of enrollees could create a boom in pharmaceutical prescriptions. Those prescriptions have to go somewhere, and Walgreen figures: Why not its stores? For the year that just ended, Walgreen reported just a 0.4% increase in prescriptions filled despite owning 19.1% of all retail pharmacy market share. Obamacare, therefore offers Walgreen a path to accelerate its prescription growth once again.

Similarly, this could be a great opportunity for pharmacy-benefits management company Express Scripts (ESRX +0.00%) to shine. More prescriptions written mean more drug delivery orders for Express Scripts. With generic fill rates moving higher, pricing power is improving for both PBMs like Express Scripts and end retailers like Walgreen, which should have a net positive effect on margins.

Clearly for optimists and investors in these stocks to feel comfortable, they'd like to see an extension of this trend toward ACA-favorability last longer than just a month, but it's nonetheless a good start for the time being.