Halloween has come and gone, but it's felt like one continuous nightmare for the Obama administration since the launch of the state and federally run health exchanges six-and-a-half weeks ago.
The primary problem has been with the federally run website, Healthcare.gov, which was only able to process some 26,794 health insurance enrollments across 36 states within the first 33 days. Even with the knowledge that health insurance enrollments tend to be very back-loaded, this is a disconcertingly low figure that is bound to have insurers worried and is only fueling opponents of the Patient Protection and Affordable Care Act, who were already calling for its repeal. And incredibly enough, I'd contend that it's not even Obamacare's biggest concern!
Ultimately, Healthcare.gov is going to be repaired; it just remains to be seen whether that gets done by the end of this month as Healthcare.gov spokesperson Jeffrey Zients has said or if it needs extra time. With a majority of enrollees expected to wait until the last minute to sign up anyway, Healthcare.gov's technical problems really aren't a gigantic worry yet.
Obamacare's greatest concern
Instead, a poll conducted by Gallup last week points to the one thing that Obamacare optimists and insurers should fear the most: Uninsured Americans are avoiding Obamacare's health exchanges.
Last week, Gallup asked 854 uninsured adults across the U.S. whether they have "personally gone to, or attempted to go to, a government health insurance website since the Internet-based health exchanges opened on October 1, or not?" Just 18% of uninsured individuals responded that they had done so, with 22% overall planning to do so at some point.
This is a big problem, because in a previous Gallup poll 44% of uninsured respondents had answered that they planned to obtain health insurance through the exchange, with 25% also noting that they intended to pay the penalty. In other words, in a little over a month the number of uninsured people intending to sign up on an Obamacare health exchange has been halved!
Why are the uninsured avoiding Obamacare's exchanges?
The way I see it, there are a couple of reasons why uninsured Americans are currently avoiding the Obamacare exchanges.
First and foremost is the bad press surrounding the numerous glitches associated with Healthcare.gov and select state-run exchanges like Oregon and Vermont. If the outward perception generated by the media emphasizes the health exchanges' problems, it gives those teetering on the edge enough reason to just hold off from visiting the website or enrolling for health insurance.
Second, let's keep in mind that a good chunk of uninsured Americans in this country are young adults who are considered to be generally healthy. These healthier young adults are what insurers need most for the ACA to be successful, since their premiums help offset the higher medical costs associated in treating the elderly and sick. Young adults are also more technologically savvy, which can be a bad thing if the health exchanges aren't working; because so many young adults incorporate technology into their everyday lives, any glitch may give them recourse to simply not come back to the Obamacare website for months, if ever again.
Third, there's just not a lot of familiarity with Obamacare even years after its passing. Although you'll find plenty of people who'll admit they understand that it's now a law, many, especially young adults, have no clue how the PPACA will directly affect them. Without making that direct connection, many young uninsured adults will simply pass on digging deeper into the subject.
Finally, as my Foolish colleague Dan Caplinger so rightly put it, the penalty is really "much ado about nothing" in 2014. The overall penalty for not obtaining health insurance is the greater of 1% of a person's income or $95, which is not particularly damaging for many compared to the alternative of paying $200 or more a month in health insurance. For many uninsured folks it's a simple numbers game -- and the penalty is winning more often than not!
How this could affect your money
Right now, UnitedHealth Group (NYSE:UNH) and Aetna (NYSE:AET) are looking like two modest early stage losers of Obamacare. It'd be a long shot to say any state in particular is performing well in regard to enrollments, but California and New York are leading the pack, with 35,364 and 16,404 enrollments, respectively, in the first 33 days. UnitedHealth Group and Aetna, however, both pulled out of California's state-run health exchange months ago, with Aetna also bowing out of New York. Admittedly, these insurers aren't missing a lot of new sign-ups -- but they certainly aren't seeing many, either, in the states they did decided to compete in.
On the flip side, if you as an investor are focusing on insurers that are targeting low-income individuals and families that will benefit from the Medicaid expansion in states like California, then you should be in great shape. A strong name to potentially consider here would be Molina Healthcare (NYSE:MOH). Molina focuses on serving Medicaid-based members, and with some 1.4 million people in California expected to be eligible for the Medicaid expansion under the PPACA it could theoretically see a nice surge in its membership figures by the end of next year.
Finally, don't forget those dark-horse private insurance platform providers like Health Net (UNKNOWN:HNT.DL), which are coming out smelling like roses with the numerous problems Healthcare.gov has undergone. Health Net has a huge presence in California's market, and may be a source that small businesses and individuals turn to if the exchange fixes aren't completed within the next month or two. Health Net has years of experience, so this would be a natural boost for its business.