The 5 States Most Responsible for Obamacare's Early Success
It's no secret that the start of Obamacare's open enrollment period has been less than perfect.
Few people, if any, expected a flawless rollout of the online federal health insurance marketplace, Healthcare.gov, or even the 14 individual state-run exchanges, given how little time was devoted to testing these platforms and how rapidly some of the rules surrounding the Patient Protection and Affordable Care Act changed following July (e.g., the one-year delay of the employer mandate). In addition, previous health reforms such as Medicare Part D have also proven to be rife with problems from the word "Go" that took nearly a year to eradicate.
However, the magnitude of the information technology issues experienced by Healthcare.gov and a few select states, such as Vermont and Oregon, constrained enrollment to a level few anticipated. Through November a mere 364,382 paying Americans had fully enrolled for health insurance, due in large part to technical glitches that made completing their application time consuming, difficult, or just plain impossible.
The winds of change
December, though, ushered in a surge of enrollments as Healthcare.gov's backbone system was finally fixed, thanks to the assistance of a trio of high-tech companies, and the Dec. 24 cutoff to obtain coverage by Jan. 1 coerced nearly 2 million Americans to purchase health insurance.
When all was said and done, combined state and federal enrollments from Oct. 1 through Dec. 28 stood at 2,153,421, yielding a nearly fivefold increase in just one month over the cumulative number of enrollees in the prior two months.
While Obamacare's enrollment success can definitely be traced to the functionality of Healthcare.gov, as well as the urgency created by the Dec. 24 enrollment deadline, certain states have simply done a good job of promoting awareness of the program. Either that, or certain demographic situations exist in these top-performing states that we as investors may able to exploit to our benefit.
Obamacare's five most important states
Let's have a look at the five states that have enrolled the greatest number of people thus far and see what, if any, similarities they might share.
Here are the five states most responsible for Obamacare's early success:
# of Individuals That Have Selected a Marketplace Plan
Probably the first thing that stands out from having previously looked at the most important states to Obamacare based on very early enrollment figures is that we now see a much better balance between states that operate their own individual health exchange and those that use Healthcare.gov as their marketplace. Florida and Texas had made the previous list, but they were were major stragglers behind New York and California. Even though California remains by far the most prominent reason Obamacare will succeed or fail, the importance of Florida, Texas, and North Carolina can't be forgotten, either.
These states combined for 1.04 million of the 2.15 million total enrollees, or 48.3% of all members who've selected a marketplace plan thus far.
Clearly there are some "duh!" factors that we've covered previously that would help explain the high number of enrollments in each of these states.
For one, many of these states have huge populations, and a larger population should proportionately have a higher number of uninsured persons prior to the implementation of Obamacare. In other words, higher population states would be a smart target for most insurance companies looking to add new members.
Traditionally blue states that favored Democratic candidates over the past couple of elections also have delivered strong enrollment figures. It really shouldn't come as a huge surprise that states that offered their support for Obamacare's implementation are the one's seeing the greatest number of people signing up. Although Texas certainly isn't a blue state and Florida is far from a lock to lean toward the Democrats come election time, the sixth through ninth states which are unlisted in our example above (Pennsylvania, Michigan, Washington, and Illinois) definitely had pro-Obamacare tendencies prior to its implementation.
Another factor worth considering here is that a number of these states are in the middle of the pack when it comes to median household income, according to three-year data from the U.S. Census Bureau. With the exception of Washington at No. 10 and North Carolina at No. 40, each of the nine top-enrolling states tend to have a middling level of household income. My thinking here is that states with high median household income are more likely to have had health insurance prior to Obamacare's implementation. Similarly, the lowest-income states probably aren't the top targets of insurers unless they're specifically going after government-sponsored enrollees.
"How is this information going to make me money?"
The aforementioned individual state data might seem like nothing more than a random walk, but it could actually be quite useful in helping us discover investment opportunities.
I've said it once and I'll say it again -- WellPoint is completely in the driver's seat when it comes to insurers. Best known for its Blue Cross Blue Shield plans, WellPoint is a strong individual market player in California and New York, and is also looking to take advantage of government-sponsored enrollees in both states.
On the flip side, Aetna has delivered more of a mixed message to shareholders by pulling out of California and New York, which together are responsible for 30% of Obamacare's total enrollments to date. It has made smart moves via its recently purchased Coventry Health Care, which filed to sell individual plans in Florida and North Carolina, but obviously shareholders may feel that Aetna walked away with a lot on the table.
Don't forget about the big beneficiaries here outside of the patients, such as hospital operators and drugstores which should see a boost in prescriptions written because of more preventive visits. The two pharmacy giants, Walgreen and CVS Caremark , should see the biggest surge in pharmacy scripts received, but Walgreen gets a slight edge with a presence in all nine of the aforementioned top states, while CVS is missing a presence in Washington. Overall, though, this is probably a negligible difference and I would anticipate both having a record year for prescriptions filled.
Finally, when you consider hospitals as an investment, a name to ponder is Community Health Systems . This provider of general and specialized hospital services would be expected to benefit as more of its treated patients obtain insurance, meaning fewer accounts that go uncollected and more revenue recognition. I specifically chose Community Health because of its presence in seven of the aforementioned nine states, including California, Texas, Florida, and North Carolina.
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Editor's Note: A previous version of this article incorrectly stated that CVS does not have a presence in California, but the author meant to write Washington. The Fool regrets the error.
The article The 5 States Most Responsible for Obamacare's Early Success originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends WellPoint. 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.
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