3 Giant Hurdles for Obamacare
Sep 22nd 2013 2:00PM
Updated Sep 22nd 2013 2:02PM
It squeaked through Congress.
It survived a legal scare that went all the way to the Supreme Court.
And although it's now the law of the land, the Affordable Care Act, commonly known as Obamacare, still has some big hurdles to leap. Here are three of the most challenging.
1. Getting the exchanges working without major glitches
The Obamacare health insurance exchanges are scheduled to go into operation on Oct. 1. With the law having been passed way back in 2010, you might expect that three years would be plenty of time to implement these systems. There have plenty of problems along the way, though, and some expect more problems come October.
In April, the White House delayed full implementation of small group health insurance exchanges known as SHOP until 2015, citing "operational challenges". Two months later, the Government Accountability Office, or GAO, reported that 44% of tasks needed for the federally operated exchanges to be operational were behind schedule. At that time, the federal watchdog agency stated that it couldn't determine whether the online marketplaces would be ready on time.
Earlier this month, representatives of insurance companies participating in the exchanges reported multiple technical glitches, including inaccurate information being shown online about health plans. One especially serious concern is that privacy safeguards might not be fully in place. The Centers for Medicare and Medicaid Services, though, says that the systems will be ready to go on schedule with appropriate privacy protection.
2. Signing up healthy young Americans
Assuming the first hurdle is successfully jumped, Obamacare will then face the next significant barrier to surmount. If sufficient numbers of healthy young Americans don't buy insurance through the exchanges, the promises of the health-reform legislation could unravel.
Administration officials have publicly stated that for Obamacare to succeed, at least 2.7 million Americans between ages of 18 and 30 must obtain coverage. A recent study by the National Center for Public Policy Research concluded that the financial incentives for younger individuals to forgo buying health insurance will prevent that number from being reached.
UnitedHealth Group is wary enough of this risk that it opted to stay away from participating in most of the state Obamacare exchanges. CEO Stephen Hemsley said the company was taking a cautious stance because of concerns that the first group of enrollees would consist of many less healthy individuals and incur high medical expenses.
On the other hand, a recent Reuters/Ipsos poll found that one-third of respondents between 18 and 34 indicated that they are "very" or "somewhat" likely to buy health insurance using an exchange. With around 16 million uninsured individuals in that age group, Obamacare will easily reach the goal of 2.7 million young Americans enrolled if that survey response proves to be an accurate predictor of actual participation.
3. Withstanding a delay
A political risk also remains. Some elected officials who oppose Obamacare are calling for a one-year delay of implementation of the Obamacare requirement that individuals purchase insurance, similar to the White House's already-enacted one-year delay for the mandate for employers to buy insurance for employees.
Survey results released by Health Pocket in July found that only 12% of respondents thought the Obamacare individual mandate should go into effect next year. Forty-one percent supported a delay, with another 47% undecided.
Despite significant public and political support for a delay, this hurdle seems most likely to be leaped. The White House has held firm that Obamacare exchanges and the individual mandate will go forward as planned.
In the Olympics, failure to jump a hurdle means losing the race. Which stocks would be the investing losers if any of these three Obamacare hurdles are missed?
If the Obamacare exchanges don't function well or implementation is delayed, eHealth would probably be one of the biggest losers. Shares are up more than 20% since eHealth landed a federal contract to support online enrollment through its website. Those gains would probably evaporate should significant glitches occur on or after Oct. 1.
Hospital stocks would also most likely tank in the event of big problems with the exchanges. Tenet Healthcare , for example, has worked hard to position itself to take advantage of Obamacare's potential benefits. The stock is up nearly 25% year to date and more than 126% over the past two years largely on the promise of how Obamacare could help hospitals.
What if the exchanges work just fine but not enough young individuals sign up? WellPoint could feel some pain. Unlike UnitedHealth, the second-largest health insurer in the U.S. decided to participate in exchanges in every state where it operates. If too few healthy Americans buy insurance, WellPoint's medical costs could eat into the company's profits.
Of course, these stocks could also be winners if the three aforementioned hurdles are successfully overcome. It won't be long before we know the outcome. Assuming there's no delay, the starting gun fires in just a few days.
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The article 3 Giant Hurdles for Obamacare originally appeared on Fool.com.Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint and owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
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