Obamacare Enrollment: A Closer Look at This Week's Numbers

If you thought the criticisms of the Patient Protection and Affordable Care Act, affably known as Obamacare, were in the forefront before, the calls of the opposition are practically deafening after the release of federal and state health insurance enrollment figures earlier this week by the Department of Health and Human Services.

Source: White House on Flickr.

No one was particularly expecting fantastic results, considering that the federally run website, Healthcare.gov, has been non-functional for a vast majority of people since it went live on Oct. 1 while numerous other state-run exchanges have yet to fully come online (Oregon and Vermont) or found their start delayed by technical snafus (Hawaii). The actual results, though, were a bit worse than most people fathomed.

No-bamacare
Overall, just 106,185 Americans were able to complete their enrollment for a health insurance plan between Oct. 1 and Nov. 2. To put that into some context, Secretary of Health and Human Services Kathleen Sebelius is targeting 7 million new uninsured enrollees before the coverage cutoff period for 2014 expires amid HHS and Urban Institute data that shows that approximately 50,252,000 people are currently uninsured in this country. In other words, Obamacare is less than 2% to its target goal for sign-ups and managed to enroll just 0.21% of the existing 50.252 million currently uninsured people.

As you might have also expected, some regions and exchanges performed better than others. With technical problems being easier to take care of on individual state-run exchanges which often have separate contractors, state-run exchanges ran circles around Healthcare.gov in terms of total enrollment.

What I'd like to do today -- rather than measuring a state's success as a cumulative enrollment figure -- is to see what percentage of currently uninsured Americans completed enrollment on their states' health exchange, note any similarities that pop up between these states, and point out how this could affect you and your investments.

Five states showing America how it's done
Here are the five states where Obamacare enrollment proved strongest as a percentage of existing uninsured individuals:

Sources: Department of Health and Human Services, Urban Institute, author's calculations.

Now keep in mind, from a purely cumulative basis, that California and New York accounted for 48.8% of all new enrollments by themselves. However, because they boast such large uninsured populations in their respective states, they weren't anywhere near the aforementioned five states when it comes to signing up uninsured individuals as a percentage of total uninsured within a given state.

The first thing that stands out here, with the notable exception of Kentucky, is that these are states which typically lean in favor of the Democratic Party's ideology. That's meaningful, since Democrats are more likely to support Obamacare, whereas Republicans usually oppose it. In other words, we shouldn't be too surprised to see the states that support Obamacare are signing up the greatest percentage of uninsured people.

Another subtlety, yet again with the exception of Kentucky, is that states with higher median household income levels have seen enrollment figures do better than lower-income states. Vermont, Connecticut, Rhode Island, and Washington are all within the top 20 states when it comes to median household income over the past three years, according to the U.S. Census Bureau. This is important, because higher median income levels can help remediate the extra costs associated with premium payments for obtaining health insurance. This is one reason we've seen the Northeast perform so well with regard to health insurance enrollments thus far relative to the South, which has some of the lowest median household income states.

A final observation that had me doing a double-take is that Vermont is leading the pack with a "conversion" rate of better than 2%. I find this remarkable, given that I dubbed Vermont's Health Connect as the biggest health exchange disaster in the country. Earlier this month, Vermont Gov. Peter Shumlin noted that residents would be allowed to keep their existing health plans longer without penalty and that it was very possible Vermont Health Connect won't be online by the time 2014 rolls around. Yet Vermont must be doing something right, as its phone and paper applications are driving enrollments within the state. It also helps that Vermont boasts the second-lowest uninsured rate in the country, so health insurance appears to be a product that Vermont residents tend to seek out on their own. 

What does this mean to you?
Clearly, these enrollment figures have to be worrying insurers that spent big money to make acquisitions ahead of the start of Obamacare. I would specifically be talking about WellPoint (ELV 0.15%), Aetna (AET), and CIGNA (CI) here, which all spent billions in corporate buyouts to get their hands on newly eligible Medicaid members, as well as a larger percentage of the individual insurance market. Thus far that's looked like a sucker's bet for all three, with roughly half of the U.S. states choosing not to expand their Medicaid coverage even though the federal government is offering funds to help these states do so, and with initial health insurance enrollment figures tracking well below expectations.

If I owned shares in any of these insurers I would certainly be displeased, but I also would suggest making sure not to overreact to the HHS's enrollment figure release. Ultimately, it's not as if these insurers are losing customers -- they just aren't gaining them at the lofty pace that most investors and analysts had predicted they would. The health insurance business remains as strong as ever for WellPoint, Aetna, and CIGNA in terms of pricing power, so I wouldn't be too concerned -- at least not yet.

The same would hold true for hospital operators such as HCA Holdings (HCA -0.13%). Investors have been valuing HCA according to a doubtful revenue collection rate of anywhere from 8% to 10% for years, so if they continue to do so they'll probably come up with a fair valuation for the company that's similar to where it's trading now. In essence, slower Obamacare enrollment isn't the end of the world for HCA, and it will find other ways to grow its bottom line, such as cost-cutting and operational efficiency improvements.