5 Stocks That Can Benefit From Obamacare
These stocks may profit from The Affordable Care Act
In 2010, President Obama signed the Patient Protection and Affordable Care Act, commonly known as "Obamacare" into law. The long wait is almost over, and effective January 1, all eligible Americans, including children, will be required to have health insurance.
In preparation for that deadline, on October 1, insurance exchanges will open, allowing people to go online and search through their various options for acquiring health insurance. These exchanges give people the ability to search through various available insurance plans, and determine whether or not they are available for any type of financial aid.
Once the exchanges open on October 1, there is a six-month window to sign up for insurance before penalties start to kick in. If you are still uninsured by March 31, you could face a fine of 1% of your annual salary, or $95, whichever is higher.
In the past, insurance companies were allowed to deny people coverage based on preexisting conditions, something that will no longer be possible. If you want insurance, you are guaranteed to get it; the only problem is that premiums may rise depending on how many people sign up.
Uninsured or uninsurable people are going to be the biggest beneficiaries of Obamacare, but there are plenty of companies that are going to benefit as well as previously uninsured people become healthcare consumers. Let's take a look at a few companies that stand to benefit from Obamacare kicking in at the start of the year.
HCA Holdings (HCA)
HCA Holdings (HCA) is a hospital operator. As of the end of last year, the company operated 162 hospitals. Obamacare helps companies such as HCA in two different ways. First, because Obamacare requires each individual to purchase insurance if his or her company does not provide it, hospitals such as the ones HCA operates will be getting paid by insurance providers as opposed to trying to collect payments from uninsured individuals. This should lead to increased profitability. Secondly, HCA should see an nice increase in their overall business. As people move from being uninsured to insured, the chances of them actually visiting a hospital rise significantly. Better collection rates, and increased operations are two reasons why HCA Holdings should be a major beneficiary of Obamacare.
HCA Daily Chart
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Molina Healthcare (MOH)
The new insurance exchanges create a major opportunity for smaller insurance providers such as Molina Healthcare (MOH). The nation's biggest insurance companies, such as Aetna (AET), have decided to not participate in a lot of the public insurance exchange being set up at the state level, fearing that the cost to cover currently uninsured individuals will be too high. While it is true that a lot of uninsured individuals have expensive pre-existing conditions, there is also a large percentage of perfectly healthy individuals that do not have insurance simply because they cannot currently afford it. For insurance companies willing to aggressively go after this demographic, there are opportunities. Molina is going to participate in public exchanges in nine different states, including California, Texas and Florida, which have the largest numbers of uninsured individuals. Molina will get to offer plans to a large number of individuals without having to spend huge amounts of money on advertising, and won't have to try to sell plans to big corporations to cover their employees. There is going to be some risk of taking on expensive customers, but the growth potential is huge, and Molina expects a $2 billion revenue increase by 2015, which would be a 33% increase over 2012 revenues.
MOH Daily Chart
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Accretive Health (AH)
Obamacare is going to result in a greater number of individuals seeking medical assistance. As a result, doctors are going to have to look for ways to improve overall business efficiency. As physicians work to improve their efficiency, they will turn to companies like Accretive Health (AH). Accretive Health helps improve efficiency in a number of different ways. It works with medical facilities to make sure that their accounting functions operate smoothly. By improving record-keeping and billing processes, medical facilities can lower their overall operating expenses. Accretive Health also helps hospitals collect the money they are owed by insurance companies. With so many more people having insurance, hospitals are going to have more dealings with insurance companies, which should lead to increased business for Accretive Health. AH has been an underperformer over the last year, but Obamacare could be exactly what turns things around.
AH Daily Chart
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CVS (CVS)
With more people having health insurance, pharmacy chains like CVS (CVS) stand to benefit. The likelihood of visiting a doctor goes up exponentially for people who are insured, so with so many more people getting health care coverage, more people will be going to the doctors for ailments they otherwise may have tried to handle themselves. Of course, the more people go to the doctor, the more prescriptions people will need to get filled. Not only will people have health insurance, they will also get prescription drug coverage, so the number of prescriptions getting filled will rise dramatically. As of the end of last year, CVS operated over 7,400 retail drugstores. In addition to its drug store locations, CVS also operates over 600 MinuteClinic locations, which should also see a rise in patient traffic. CVS also owns Caremark, which is among the nation's pharmacy benefit managers, which means that many people who get their prescriptions filled by mail may also be getting their prescriptions filled by CVS.
CVS Daily Chart
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Life Time Fitness (LTM)
Fitness clubs may benefit from part of Obamacare deals with wellness programs. The government now allows companies to charge employees more to participate in company healthplans based on an unhealthy lifestyle. The healthier you are, the less you will have to pay to participate in your company's healthcare plan. Fitness clubs like Life Time Fitness (LTM) could see an increase in memberships as a result. For example, previously if you were a single male, your insurance costs were the same as every other single male. Now, overweight employees and people who smoke may have to pay more. For some people, the idea of simply losing weight for the sake of losing weight is not a big enough incentive to run out and join a gym, but the idea of lowering their health insurance premiums may be. Exercising will not only help your insurance premiums go down, but Obamacare also has provisions to reimburse people for the costs of fitness club memberships. Once people get a better grasp of the financial advantages of losing weight I expect to see fitness clubs enjoy a boost in memberships.
LTM Daily Chart
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Courtesy of Michael Fowlkes, marketintelligencecenter.com [6]