Obamacare Exchanges' Achilles' Heel
Will Obamacare share the same fate as Achilles?
In Greek mythology, some predicted that Achilles would die young. To prevent this, his mother dipped him in the River Styx to make him invincible. All of Achilles was covered -- except his heel. He later survived many battles, only to meet his end from a poisonous arrow shot into, of course, his heel.
There have also been plenty of premature predictions of the demise of the Affordable Care Act, commonly known as Obamacare. But the legislation has survived a difficult congressional battle, a narrow Supreme Court decision, and at least 41 attempts to derail it. Now that the health insurance exchanges are running, has Obamacare proven its invincibility? Maybe, but an Achilles' heel could exist for the health reform act -- and the exchanges might expose that weakness.
President Obama warned in April that there will be "glitches and bumps" as the Affordable Care Act is implemented. He was right.
Only a few weeks ago, insiders involved with the federally run exchanges revealed that the system was miscalculating prices. Days before the scheduled launch of the small business exchanges, Health and Human Services officials announced that online exchanges for small businesses wouldn't be operational until November -- a one-month delay. Many predict widespread glitches will continue as more Americans use the individual exchanges and later use these small business exchanges.
But will technical glitches by themselves be Obamacare's Achilles' heel? Probably not. Americans can sign up for health insurance the old-fashioned way, using paper applications or over the phone, even if the online exchanges totally bomb.
There's also time to resolve technical issues. While the exchanges launched on October 1, open enrollment extends through the end of March. The first effective date for insurance is January 1.
If the glitches don't doom Obamacare, some think the costs might. But weren't there lots of reports about the premium costs announced by the federal government being less than expected? Yes, but that's comparing the premiums announced for 2014 against what the Congressional Budget Office projected costs to be in 2016.
The reality is that health insurance obtained through the Obamacare exchanges might be less or more expensive than what a given individual currently pays depending on several variables, such as age, gender, state of residence, income level, current policy benefits, and more. Some people will pay less. Some will pay more.
Could this cost issue bring Obamacare down? Again, perhaps but probably not on its own. For every dollar that one American pays more for health insurance, someone else is paying less. There could be plenty of citizens angry over higher costs, but lots of happy ones with subsidized insurance, too.
All of this leads me to what I think could be the Achilles' heel for the Obamacare exchanges and the whole health reform law itself: human psychology. We humans tend to remember and focus our attention on negatives much more so than we do positives. As Florida State University social psychology professor Roy F. Baumeister and his co-authors wrote in a research paper on this subject: "Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation than good ones."
As the Obamacare exchange kick into gear, most of us will dwell on every glitch and report of someone paying a lot more for insurance than they did in the past. Sure, we'll hear about the good stuff, too. Our brains won't attach as much importance to that information, though.
It's important to remember that most Americans receive insurance through their employers and won't participate in the exchanges. Their opinions will be formed and reinforced largely by what they see and hear about others' experiences. There probably will be technical glitches. There certainly will be some people upset about their premiums. Those negatives will carry heavier sway than positive reports if the psychologists are right.
Jumping on a bruised heel?
Now, The Motley Fool isn't a psychological journal nor a political website. We serve investors. The question we ask, in light of psychological and political factors, is "How can the individual investor profit?"
There already exists some bipartisan support for overturning the medical device tax implemented with Obamacare. Should the tax be rolled back, Medtronic is one of several medical device makers that could reap rewards. The company reigns as the largest medical technology company in the world, with products ranging from pacemakers to neurostimulators -- devices that currently are taxed more highly than in the past.
More sweeping changes could mean huge changes for multiple industries. However, before anyone gets carried away, we should note another principle of human nature: the tendency to jump to conclusions.
I don't doubt that plenty of negative stories about Obamacare will influence the minds of millions of Americans. However, that doesn't necessarily mean that health reform will be radically changed -- and certainly doesn't mean anything major will happen in the next few years.
Dipping your feet in the water
Probably the smartest moves for investors would be to buy shares of companies that profit from trends that supersede Obamacare or any other future health reform legislation. For example, we know baby boomers are aging. We know that older people tend to use more prescription drugs.
I like Celgene in part because it's in a position to capitalize from two of the markets for diseases impacting older individuals -- cancer and arthritis. The biotech counts powerhouse blood cancer drug Revlimid and up-and-coming cancer drug Abraxane in its lineup. It also hopes to gain approval for psoriatic arthritis drug apremilast in the near future.
Americans will need to purchase most of their prescription drugs directly from retail pharmacies. Rite Aid has been on a roll so far in 2013 and could continue those winning ways. The fourth-largest pharmacy chain in the U.S. struggled in recent years but appears to be on the right track these days. Like its larger rivals, Rite Aid should benefit from higher prescription drug use.
And what if Obamacare exchanges and the overall legislation prove successful in the long run? Professor Baumeister stated that many good events can overcome the impact of bad events. To be specific, five good things outweigh one bad. So, if Obamacare's positives are five times as good as the negatives, this theoretical Achilles' heel won't matter. Investors who dip their feet in the water with solid health-care stocks should emerge victorious regardless of what happens.
More Obamacare targets
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The article Obamacare Exchanges' Achilles' Heel originally appeared on Fool.com.Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Celgene and owns shares of Medtronic. 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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