The past three months have been nothing short of organized chaos when it comes to the ongoing reform of our health-care system.
Obamacare, which has been a widely polarizing law based on your political views, has had quite a few setbacks and triumphs within the first three months since its state and federally run health exchanges went live on Oct. 1.
On one hand, IT-architecture and server-based glitches rendered the federally run Obamacare website, Healthcare.gov, practically useless throughout the first two months. In that time a mere 137,204 people managed to fully enroll for health insurance -- a paltry figure, considering that the Department of Health and Human Services is targeting 7 million cumulative new paying members before the March 31 coverage cutoff date.
Then again, enrollments absolutely surged in December as the Jan. 1 coverage cutoff date came and went, encouraging both Medicaid-eligible and individual payees to enroll. Through the end of December, enrollments spiked from a state and federally combined 365,000 to more than 2 million. In other words, the ideal that a more universal health system is still alive and well.
With the calendar ticking over to a new year, the guessing game has finally given way to some concrete results, whether we're ready for them or not. Early on, however, there are two interesting observations which bode as both extremely positive and considerably worrisome for Obamacare's long-term prospects.
This is a huge positive for Obamacare
According to research statistics from ZocDoc, an Internet-based company that allows consumers to search for a primary physician and log other medical queries, and as reported by Reuters, the vast majority of patients visiting their doctors within the first few days of the New Year were there for preventative care reasons and not because of a pre-existing illness.
One of the biggest concerns heading into the New Year for insurers was that adverse selection -- the expected process whereby the sickest and most in-need of care consumers would sign up first -- would drive up medical costs. It would certainly make sense that those who were previously uncovered would jump at the chance to obtain health insurance now that insurance companies can no longer deny people expressly because of pre-existing conditions. The great news, early on, is that this doesn't appear to be the case.
ZocDoc notes that just 7% of all searches on its website indicated that people had a pre-existing condition. That's welcome news for national insurers such as WellPoint (NYSE:ANTM) and UnitedHealth Group (NYSE:UNH), whose shareholders had to be concerned that weaker-than-expected enrollments coupled with adverse selection could wreak havoc on these insurers' bottom lines, at least in the interim.
But you should also be worried about this ...
While investors are certain to be championing the fact that medical costs are unlikely to spike based on this early action, which could be instrumental in keeping premiums somewhat similar in 2015, they should also be somewhat concerned by the lack of a surge in doctor visits during the first few days.
I know what you're thinking, and yes, this a double-edged sword. One of my primary concerns that I voiced more than a year ago was that our health-care system would be overwhelmed by a surge in new patients waiting to get preventative care. With the number of doctor's licenses in this country growing at less than 1% per year, coupled with the fact that some physicians are simply choosing to opt out of accepting Obamacare-purchased insurance policies, the potential for a quagmire was readily apparent. ZocDoc's data would suggest that the lack of a surge in visits is a positive in that we won't see our primary care physicians get overwhelmed.
On the other hand, hospitals such as HCA Holdings (NYSE:HCA), and drugstores such as Walgreen (NASDAQ:WBA) and CVS Caremark (NYSE:CVS) are counting on more insured patients to visit their doctor for preventative care visits and for those patients to be written drug prescriptions.
HCA, for example, wrote off $3.77 billion in revenue from treated patients as uncollectable in fiscal 2012 because they were either uninsured or underinsured. Obamacare was supposed to help rectify this problem with the help of the individual mandate -- the actionable portion of the Patient Protection and Affordable Care Act that requires individuals to purchase health insurance or face a penalty that in 2014 is the greater of $95 or 1% of their annual income -- but that may not be the case. If doctor visits don't increase, then it's unlikely that HCA will see a measurable increase in collectible revenue.
Similarly, Walgreen and CVS are counting on their pharmacies to drive big top- and bottom-line growth in the coming years, with front-end store sales struggling under the weight of increasing competition and loyalty reward promotions. Walgreen spokesperson Markeisha Marshall told Reuters over the weekend, "At this time, activity is fairly typical of what we experience each year when insurance changes take effect." Marshall did, however, reiterate her belief that prescriptions written are expected to soar, perhaps beginning as early as next week. As it stands now, though, pharmacy sales have disappointed in the early going.
The next three months will be telling
Since we're but five days into the beginnings of Obamacare, there's still a lot that can, and will, change. In essence, placing too much credence in these early results would be a foolish thing to do.
However, this early data also gives us a general sense of how consumers are reacting to the new law. There are a few key factors we'll want to keep our eyes on over the next three months as we rapidly approach what I consider to be the very crucial March 31 coverage cutoff deadline to obtain health insurance in 2014.
The primary piece of data we need to be aware of, above all else, is whether young adults are signing up. Regardless of how many government-sponsored and individual enrollees join under Obamacare, insurers are going to have a next to impossible time keeping premiums down in 2015 if healthier young adults don't sign up to help counteract the higher costs of treating sick and elderly patients. By the beginning of April we should, hopefully, have a better gauge of how effective the campaign was to sign up these young adults.
The other thing worth watching is that aforementioned March 31 deadline. Although enrollments spiked in December, I don't consider it to be a particular important deadline for Obamacare. With most Americans waiting until the last minute to pay their bills (and an insurance premium is still nothing more than a bill), I wouldn't be surprised to see the majority of paying citizens wait as long as possible to fully enroll without violating the provisions set forth by the individual mandate in the PPACA.