Could anything about the Affordable Care Act, commonly referred to as Obamacare, surprise anyone at this point? Maybe so.
A recent report from market research firm S&P Capital IQ revealed some intriguing findings about the impact of Obamacare. Insurers submitting their 2015 premium costs to several states have also stirred things a bit. Here are three revelations that just might astound you -- and maybe confound you, too.
1. The S&P 500 could pocket an extra $700 billion.
Over two-thirds of a trillion dollars could be finding its way into big corporations' treasure chests, according to S&P Capital IQ Global Market Intelligence. The firm estimates that large employers will save almost $700 billion through 2025 because of Obamacare.
That prediction probably surprises many. It wasn't even a year ago that Delta Airlines (NYSE:DAL) projected just the opposite. In a letter to an Obama administration official, the airline expressed concerns that their health-related costs could jump by as much as $100 million annually.
But the skies might be friendlier for Delta and other major employers than previously thought. S&P Capital IQ analysts expect that large organizations will shift many employees and retirees to public and private health insurance exchanges, saving big bucks in the process.
This idea makes sense for lower income workers who qualify for federal subsidies, but what about other employees who receive health insurance through their employers currently? S&P Capital IQ says that even if the delayed Obamacare employer mandate is ultimately implemented, the penalties won't be enough to make it financially attractive for many companies to continue offering health coverage to their workers. Lower health care costs means higher bottom lines for these corporations.
United Parcel Service (NYSE:UPS), for example, dropped coverage for working spouses of its non-union workers last year. The large shipping and logistics company attributed the move to rising health-care costs in general -- and costs associated with Obamacare. The result? $60 million in expected annual savings.
2. Obamacare fans and foes were both right about premium increases.
Plenty of critics of Obamacare have predicted that insurers will jack up their rates after the first year of operating on the health exchanges. Supporters of the health reform legislation maintained that increases will be in the single digits, similar to the trend from past years. So far, it's looking like both sides are partially right.
Virginia released proposed 2015 rates from insurers a few days ago. Kaiser Foundation Health Plan of the Mid-Atlantic States came in on the low end of the range, raising premiums by only 3.3%. On the other hand, CareFirst BlueChoice proposed to hike rates for its members by 14.7%.
The state of Washington made its rate proposals public soon after Virginia, with some more extreme results. Molina Healthcare actually cut its proposed premiums by 6.8%. Meanwhile, Time Insurance Company plans to kick rates up by a whopping 26%.
Overall, results from these two states provide some level of comfort to Obamacare supporters. However, the worst could be still to come. Residents of states that experienced poor enrollment could see significantly higher premiums next year. Likewise, states that allowed insurers to permit members to keep previously canceled plans could see bigger rate hikes. We'll have to wait a little longer to find out which side's predictions were more accurate than the other's.
3. Employees will pay more -- then less -- of health insurance premiums.
With premiums going up and employers potentially shifting responsibility for obtaining health insurance to workers, will employees pay more for their insurance? Yes, they will. But then they will later pay less -- if S&P Capital IQ is right.
In 2012, employers shouldered 24.5% of total health-care premium costs. That figure will rise significantly according to S&P Capital IQ's analysis, reaching 34% by 2018. After that, though, the percentage will reportedly taper off to a little over 26%.
With employers paying less and employees also eventually paying less, who's picking up the tab? Uncle Sam.
S&P Capital IQ projects that the federal government's share of total health-care premium costs will skyrocket from just below 4% in 2016 to over 41% by 2025. Most of that huge jump will occur over the next six years.
From astounding to abounding
At least one thing isn't surprising: there's still a path to make money from the Obamacare trends. You could potentially profit from buying stocks of companies like UPS that should have better bottom lines from lower health-care costs as a result of moving people off their plans. A more direct way to benefit, though, could be by investing in private health exchange operators.
EHealth (NASDAQ:EHTH) stands out as the publicly traded company getting the most attention when it comes to the public Obamacare exchanges. The company won a contract that allows it to sell the same plans online that are offered by the federally operated Healthcare.gov website. However, the stock comes at a steep price -- trading at a sky-high 84 times its forward earnings.
Look to other private health exchange operators for better bargains. Marsh & McLennan (NYSE:MMC) is in the thick of the private exchange game with its Mercer business unit. Mercer recently teamed up with privately held GetInsured, which landed a federal contract like eHealth did.
The Mercer Marketplace online exchange currently supports 67 employers with 282,000 members, including employees, retirees, and family members. Mercer allows these members to access individual medical plans on the public Obamacare exchanges as well as other plans from a single point of access. Marsh & McLennan appears possibly poised to reap rewards with its Mercer subsidiary as employers get out of actively managing health insurance.
Expect more surprises along the way as the impact of the health reform legislation is felt more fully. Twists and turns along the way, though, present abounding opportunities for astute investors.