Every week Obamacare optimists come to the table with the thought that it can't get any worse or there won't be any additional delays, yet they wind up disappointed. Although part of this statement is true in that problems with the federally run website, Healthcare.gov, aren't worsening, the delays are really beginning to mount, posing a genuine threat to the new law's credibility.
Before I offer my answer to this question, let's have a look at some of the delays that have put the long-term functionality of the Patient Protection and Affordable Care Act, which many known by its short-hand as Obamacare, into the spotlight.
Obamacare's mounting delays
The first big delay that opened Americans' eyes, and added fuel to opponents' fire, was the announcement in early July from the Obama administration that it would delay the start of the employer mandate a full year until Jan. 1, 2015. As a reminder, the employer mandate is the actionable portion of the PPACA requiring businesses of 50 or more full-time employees to provide health insurance options to their workers and to subsidize those workers in cases where the premiums would cost more than a certain threshold of their annual income (in 2014 that figure is 8% for individuals, but it could be fluid in upcoming years).
According to regulators, the move was being made to gauge how effectively individuals oriented themselves with the individual market and to give businesses time to comply with the transformative new law. I would also propose, though, given the problems we've witnessed with the health exchanges thus far and the clear lack of testing before launch, that it would have been a technological impossibility to get the exchanges ready to handle corporate enrollments by the Oct. 1 launch date.
Then again, earlier this month, President Obama, in response to a number of Americans who were having their insurance plans cancelled because they didn't meet the tougher but more expansive requirements of coverage as set forth under the PPACA, proposed allowing insurance companies to keep what would be cancellable plans in effect throughout the entirety of 2014 in order to give people time to transition to the new health care platform (and presumably take some pressure off Healthcare.gov's many technical woes). There are no guarantees that this will work, of course, because it has to be enacted on a state-by-state basis, not on the federal level.
Just this past week, the Department of Health and Human Services announced that it will push back the beginning of the open enrollment period for health insurance in 2015 from Oct. 15 to Nov. 15. Although White House spokesman Jay Carney noted that this move was made with the intent of allowing insurers more time to assess their rates and patient pool heading into 2015, many view it as nothing more than political wrangling since the open enrollment period begins after the 2014 midterm elections.
Finally, the Obama administration also pushed back the time period consumers will need to enroll by in order to get covered by Jan. 1. The date shifted to Dec. 23 from Dec. 15 -- hardly a bump, considering the nearly two months of issues Healthcare.gov has undergone.
Is the damage done permanent?
Amazingly enough, despite all of these problems the damage isn't irreparable -- at least not yet, in my opinion.
Although enrollment figures have been nothing short of dismal -- just 26,794 people completely enrolled in health insurance across 36 states over the first 33 days (Oct. 1-Nov. 2) -- the number of people who've created an account and gone through the identification process is far greater.
Let me tell you as someone who's personally enrolled in Obamacare (albeit on a state-run exchange), the identification process is fairly time-consuming, so people would have to be generally interested in obtaining health insurance if they were going to complete the process. According to the coinciding figures with the Oct. 1 through Nov. 2 timeframe, 975,000 additional people completed the application process but had not selected a plan yet. In other words, if all of these people were to sign up, we're looking at 1 million newly insured people just from Healthcare.gov alone. Obviously a 100% sign-up rate is wishful thinking, but I have to think a vast majority of those completing applications will choose to complete their enrollment, though many are likely to wait until the very last minute (i.e., March) to make their purchase.
What this proves is that the idea of Obamacare is still healthy in people's minds. Consumers don't necessarily have to like either political party behind the law or even the way the president has handled the delays thus far, but the interest in a more universal health care system is clearly there. In other words, it's a lot harder to kill an idea than it is to tarnish the reputation of a party of a person, which is one reason I believe Obamacare will motor ahead.
Another factor worth considering here that I've touched on before is that sign-ups for Obamacare are expected to be back-loaded. Using Massachusetts as the perfect example, its health care reform law, enacted in 2006, saw just 6% of total enrollees sign up through the first two months. That means over the following nine months, the remaining 94% of enrollees signed up. Think of signing up for health insurance as waiting until the last minute to pay your most hated bill. It's not as if people don't want insurance -- they're just holding off on paying the premium as long as they can without be subjected to paying the individual mandate penalty of the greater of $95 or 1% of annual household income.
What this means for your investments
Honestly, despite the worries, not a whole lot has changed from the current investing perspective. Whereas insurers such as UnitedHealth Group (NYSE:UNH) and WellPoint (NYSE:ANTM) were viewed as potential losers when the PPACA was passed into law, I'm struggling to find a scenario where they don't come out smelling like a rose over the long term.
On one hand, while Obamacare limits UnitedHealth and WellPoint's medical loss ratio at 80%, requiring them to spend at least 80% of their premiums collected on patient care, it does bring in the possibility of millions of new enrollees, which will aid growth over the long run. Conversely, even if Obamacare were to somehow fail, insurers such as WellPoint and UnitedHealth Group had incredible pricing power long before this new health reform law was enacted.
Also, with respect to UnitedHealth, which gets about one-quarter of its business from Medicare Advantage -- a supplemental health insurance plan that helps bridge the costs paid out of pocket by Medicare patients -- it would probably see growth in its Medicare Advantage business no matter which scenario ensues. Put simply, insurers are still on a path to prosperity.
Perhaps nothing stands out as a more striking near-term and even longer-term beneficiary throughout this process than private-party insurance platforms and cloud-based medical application providers.
Within the private party platform I suggest you keep your eyes on eHealth (NASDAQ:EHTH). The company's already had an incredible run, and assuming Healthcare.gov's problems aren't fixed in a relatively quick manner, we could see consumers bypassing Healthcare.gov and going straight a private-party platform that can essentially offer the same pricing and plan variety as any Obamacare health exchange. The point being that eHealth's platform works, and it's been around for years, so this company knows what it's doing. I would suggest that its revenue growth rate could actually exceed 20% over the next two or three years.
Another not-so-inexpensive beneficiary that bears watching is athenahealth (NASDAQ:ATHN), a provider of cloud-based software applications that encompass revenue cycle management and practice analytics functions. In short, many of Obamacare's reforms are leading to short-term spending spikes and a relatively uncertain growth environment. For hospitals and outpatient facilities, this means maximizing their existing operations by making them as efficient as possible, which is where athenahealth comes in. With expected sales growth of 40% this year and 29% next year, this is a high-growth name investors would be wise to have on their watchlist.