The Patient Protection and Affordable Care Act is a transformational health-reform law that has changed the way Americans purchase health insurance, as well as how insurers qualify the uninsured and price their health plans.
The PPACA, better known as Obamacare, certainly got off to a rocky start in Oct. 2013 when the servers and software that ran the majority of state-run marketplace exchanges and the federally run Healthcare.gov malfunctioned. The resulting chaos meant millions who were interested in enrolling for health insurance were unable to for months.
However, the problems were eventually fixed, and in its second year of enrollment (Nov. 15, 2014 to Feb 15, 2015) Obamacare wound up enrolling close to 12 million people. This is considerably higher than tempered estimates from the Department of Health and Human Services, which expected only 9.1 million people to be enrolled by year's end. Even assuming some natural attrition throughout the remainder of the year, this enrollment figure is looking better than expected.
This Obamacare number just turned positive
But one factor has stood out on Obamacare for years: Americans' near-universal dislike of this law.
In November 2013, Obamacare's favorability rating, according to the Kaiser Family Foundation Health Tracking Poll, which has been measuring Americans' sentiment toward the law since it was signed into law in 2010, hit its lowest level on record -- just 33%. Comparatively, 49% of adults at this time had an unfavorable view. Amazingly, this 16-percentage-point gap between an unfavorable and favorable view of the health-reform law would repeat in a number of KFF's regular polls.
However, in April 2015 we witnessed something we haven't seen since November 2012, a span of 29 months. According to KFF, 43% of respondents to its poll now find Obamacare to be favorable, compared to 42% who believe the health-reform law is unfavorable. Understand that there is a margin of error here of plus or minus three percentage points, and an undecided or "I don't know" crowd of 15% could easily be swayed to either side. But nonetheless, this technically represents Obamacare's first favorable view from the public since it was officially implemented on Jan. 1, 2014.
Why don't Americans like Obamacare
The question we have to ask now is whether this favorable view of Obamacare can actually stick around, or whether it's just another temporary blip on the screen. As you've seen in the KFF chart above, the favorable view has had the upper hand for just a few months over more than five years of sentiment history.
So, what is it about Obamacare that Americans really don't like? I suspect it boils down to three factors.
First, it's the individual mandate, which is the actionable component of the law that states you either have to purchase health insurance for the current calendar year or face a penalty when you do your taxes. Whether you feel invincible and don't believe you'll need health insurance, or you dislike the idea of being coerced to buy health insurance, the individual mandate isn't very popular.
The penalty for not having health insurance in 2015 is equal to the greater of $325 or 2% of your modified adjusted gross income, unless you qualify for around a dozen exemptions to the individual mandate, most of which revolve around religious or income exclusions.
Though unpopular, it's a seemingly necessary move to encourage younger, healthier adults to sign up. Young adults are critically needed by insurers to help offset the costs of enrolling sicker individuals and those with preexisting conditions.
Secondly, Americans worry about the costs associated with Obamacare. Even with insurers submitting premium pricing requests for the following year to the Office of the Insurance Commissioner in each respective state, consumers can't help but be concerned that insurers will exert their clout to remain profitable, perhaps even staying out of certain markets to keep competition low and premium prices up.
Beyond the doctor's office there are also the physical costs to implement Obamacare. The CBO initially estimated that Obamacare could cost Americans $1.76 trillion over the coming decade, but it has since revised that projection down to $1.2 trillion. Still, this is no drop in the bucket, and it's clearly concerning some Americans.
Lastly, some people believe Obamacare will reduce their quality of care. Millions of Americans were required to change primary physicians when Obamacare was implemented as certain doctors simply refused to accept Obamacare-related insurance.
Furthermore, enrolling millions via Medicare could mean even longer lines at the doctor's office. According to the 2015 American College of Emergency Physicians Poll, three-quarters of emergency room physicians note an increase in ER volume since Obamacare went into effect. This is worrisome because we'll already be facing a major physician shortage in the coming decade or two.
A change of heart
Yet, in spite of these fears, KFF's data suggests the American public may be coming around to Obamacare. So, what's changed?
To begin with, premium pricing pressures haven't been nearly as bad as expected. Admittedly, we can't put the onus of that entirely (or even majorly) on Obamacare, as the Great Recession was a major drag on healthcare plan pricing for years. Still, having transparent marketplaces where consumers can shop, and where competition is on the rise, is a presumably good thing for consumers and premium pricing.
Another key point is that insured Americans appear to be getting the most out of their coverage. Newly insured individuals haven't been afraid to seek medical care since the law has been in effect, causing insurers' medical utilization ratios to rise. Eventually this could do a number on premium pricing in 2016, but for now the insured are probably pretty happy with their ability to receive medical care where little to no avenues previously existed.
Finally, don't underestimate the power of understanding. Obamacare wasn't an easy law to interpret when it first made its debut, and many Americans didn't know what to expect. With some time under their belt, Americans may be taking a softened view of the law, especially with enrollment figures hitting the mark in its second calendar year.
This isn't a reason to buy insurers
Despite this surprising change in sentiment by KFF respondents, I wouldn't encourage investors to use it as firm reasoning to buy stock in health insurance providers at the moment.
Insurers are facing a number of hurdles in the coming months, including the Supreme Court's ruling on King vs. Burwell next month which will decide the fate of federal subsidy payments for enrollees via Healthcare.gov, as well as the possibility of needing to go toe-to-toe with state commissioners' offices over insurance plan pricing in 2016.
Anthem (NYSE:ANTM), formerly WellPoint, is shielded from much of the effects of King vs. Burwell since it operates in mostly state-run exchange markets, but it may nonetheless struggle to pass adequate rate increases if the medical utilization rates for its Obamacare and Medicare enrollees are rising. It's an even scarier situation for smaller providers like Centene (NYSE:CNC) which are generally weighted heavily toward states on Healthcare.gov's network and had little knowledge of the private market prior to Obamacare.
I believe this remains a watch-and-wait scenario for investors, although we should continue to keep a close eye on KFFs near-monthly data to determine if this is just another blip or perhaps the start of the first real trend in positive sentiment since Obamacare's approval in 2010.