There's no shortage of opinions on the Affordable Care Act, or ACA, otherwise known as Obamacare. But regardless of whether you're for it or against it, its implementation and success in signing up new members this year could send profits higher for many businesses. So we asked three Motley Fool analysts to tell us which companies they think could benefit the most from Obamacare in 2015. Read on to learn which three companies they picked.
Todd Campbell: Hospitals have been big beneficiaries of the Affordable Care Act. Whether it's thanks to exchange-purchased health insurance or Medicaid expansion, millions of Americans have become newly insured. That's been a boon to hospitals like Community Health Systems (NYSE:CYH) because treatment for uninsured Americans -- most of which is written off -- totals as much as $51 billion annually.
If Obamacare succeeds in signing up more people this year, the amount of that charity care should continue to shrink, and that may have a big profit-friendly impact on Community Health, which is one of the nation's largest hospital operators.
Community Health is already seeing its bottom line benefit from exchange and Medicaid enrollment growth. In the third quarter, Community Health reported that its trailing 12-month operating margin improved from about 5.6% in the first quarter to nearly 6.5% as the amount of money that it set aside for doubtful accounts fell to 13.8% of its gross sales, down from 14.4% last year.
Cheryl Swanson: The Obamacare exchanges kicked off with only a few hitches this November, and nobody is cheering more loudly than your neighborhood pharmacy. In particular, recently rebranded CVS Health Corporation(NYSE:CVS) seems determined to prove it's no longer a retail business, but a healthcare company. If it succeeds, CVS is in line to be one of Obamacare's biggest beneficiaries.
The stock was on fire last year, despite management's controversial decision to ban tobacco. Cigarettes previously brought in about $2 billion in yearly sales. That's less than 2% of total revenue, which reached $127 billion in 2013. The decision bit into profits, but prescription drugs made up for the loss, and the company surpassed Q3 estimates. Revenue increased nearly 10%, to $35 billion, ahead of analysts' expectations by more than $250 million.
With the ACA, CVS has a major growth opportunity for its rapidly expanding MinuteClinics. A higher number of Obamacare-insured patients is leading to a shortage of primary care physicians. CVS has 800 walk-in clinics, with plans to expand to 1,500 locations by 2017. The goal is to make the nurse-practitioner-staffed clinics a convenient, low-cost destination for chronic and routine care.
Flying somewhat under the radar is CVS's involvement in coalitions created by Obamacare to control costs, known as accountable care organizations. CVS is far and away the leader in the pharmacy sector, with 41 such coalitions in place. A recent example is MedStar Health, whose 10 hospitals and 4,400 doctors will be linking electronic medical records to CVS pharmacies to better coordinate care.
Keith Speights: At the end of 2013, I included Anthem (NYSE:ANTM) -- up until this week known as WellPoint -- as one of Obamacare's biggest winners of the year. With only a few weeks remaining this year, I'd say the large health insurer remains one of the biggest beneficiaries of the health reform law: Anthem's stock is up a whopping 39% year to date.
There's a good case to be made that 2015 will be yet another great one for Anthem if all goes well for Obamacare. The insurer participates in the health exchanges of all 14 states in which it operates. It stands to profit if more Americans sign up for health insurance rather than pay the increasing financial penalties.
Anthem experienced strong year-over-year growth of 17.4% in Medicaid membership last quarter, thanks to the expansion of the hybrid federal-state program incented by health reform. CEO Joe Swedish expects the company will continue to see solid Medicaid gains into next year.
The stock should keep the Obamacare-fueled momentum going in 2015 barring any big bumps in the road. As Obamacare goes, so goes Anthem.
Todd and Keith don't have positions in the companies mentioned. Cheryl is long Anthem. The Motley Fool recommends Anthem and CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.