The 10 States Most Critical to Obamacare's Success
Obamacare's health exchanges right now are like a four-lane highway that has three lanes closed for construction. Things are moving, but the chokepoint is causing traffic to move at a snail's pace.
We're a little more than two weeks into this grand experiment known as health insurance reform, and it's yielded both successes and failures -- even among the Fools I work with. For instance, I had almost no problems signing up online for health insurance in my home state while a colleague stared at the Healthcare.gov off-gray screen of death for more than 30 minutes without any success. It really underscores the mashed-together infrastructures behind the state and federally run exchanges and the condensed time frame under which information technology companies had to construct the highly complex architecture behind each exchange.
This week, we received our first glimpse at enrollment figures for the health exchanges managed by nine states and the District of Columbia. For the most part, they were weaker than expected given the numerous glitches most states have experienced, but also offer promise for the future that a good number of uninsured individuals are interested in obtaining affordable health insurance.
The 10 most important states to Obamacare's success
That's why today we're turning our attention away from the enrollment figures that the Department of Health and Human Services (which runs Healthcare.gov) refuses to give us for the 36 federally managed exchanges. Instead, we'll dig into previously unreleased projections that The Associated Press has been able to obtain that'll give us a state-by-state breakdown of the government's anticipated Obamacare enrollment.
Overall, according to estimates and the AP, Obamacare aims to sign up 7 million people prior to the March 31, 2014, coverage cutoff date. Listed below are the 10 states that would be considered the most crucial to reaching that figure, according to the state-by-state enrollment breakdown estimates:
These 10 states alone are projected by the government to sign up 3.56 million currently uninsured people for health insurance, or more than half of the targeted 7 million new enrollees. Let's see if we can identify any marked similarities between these states, as well as look at what companies could stand to benefit from a surge in enrollments.
What these states have in common
Obviously, there isn't a blueprint that will encompass all 10 states listed above, but there are some notable similarities I see that are keys to Obamacare's success.
To begin with, many of the states -- with the exception of Texas, Georgia, and often North Carolina -- have favored the Democratic Party in recent presidential elections. We at The Motley Fool don't care about partisan bickering, but in this case it pays to note that states that backed President Barack Obama's re-election and his call for health reform are probably also a good bet to see the biggest number of new enrollees. It doesn't exactly explain the three aforementioned states, but it does help understand why we should expect strong enrollment figures from Oregon, Washington, New York, and California.
Another not-so-secret reason these states are crucial to Obamacare's success rests solely with their larger population totals relative to many other states. A large number of inhabitants will automatically draw more attention from insurers to these states, which will increase competition and potential advertising to gain new members. Simply put, more marketing means a better chance at reaching a broad audience.
Which stocks will benefit the most and which will miss out?
Perhaps the toughest role to play is that of the fortune-teller when it comes to predicting how many people will sign up for health insurance and, more importantly, when that'll happen. On paper it would appear that all insurance companies should benefit from a surge in new members, but common sense says some will clearly do better than others.
In the plus column, I can really only find one company that should, on paper, clean up relative to its peers: WellPoint .
WellPoint, the company behind the Blue Cross Blue Shield Association, has set up shop in 14 states. Most notably, WellPoint is one of the primary insurers in California where it, Health Net , and Kaiser Permanente dominate the individual health insurance landscape, controlling a combined 75% of the market share. That's good news when there are potentially 1.3 million uninsured members up for grabs. WellPoint is also participating in New York, Georgia, and Ohio, giving it access overall to roughly 1.9 million of the projected 7 million new enrollees among the 10 most crucial states. Again, that doesn't guarantee WellPoint success, but it certainly gives it a strong edge over its peers.
In the other neck of the woods, we actually saw insurers like UnitedHealth , Aetna and Cigna pulling out of participation in the health exchanges of highly competitive and densely populated states. All three companies bowed out of California's insurance exchange in May. Individually, Aetna also bowed out of New York, Ohio, and Georgia (which ironically are the same states where WellPoint could see big growth opportunities); Cigna exited the Pennsylvania marketplace; and UnitedHealth opted out of Pennsylvania, New Jersey, Illinois, and a handful of other exchanges.
These three insurers do have certain strongholds, such as Aetna selling policies in Florida and Pennsylvania, which have close to 700,000 forecast new enrollees. However, these insurers' cautious approach to jumping into the individual marketplace has the potential to backfire if the initial glitches and resistance to obtaining health insurance subside.
Then again, I do understand why these insurers decided to stay out of some of these bigger states -- they're predominantly focused on group-based insurance, not individual policies. In addition, many larger markets such as California are dominated by a few insurers. By sticking to the sidelines these three don't have to spend out the nose trying to establish a name for themselves against incumbent insurers, which will keep costs down in a very uncertain reform landscape. Also, based on the sheer number of glitches we've witnessed so far with the federally run health exchanges, it could take up to a year before we really see enrollments ramping up, which would mean that insurers that waited on the sidelines could swoop in next year without really missing a beat.
As usual, only time will tell if these prognostications prove true, but it'll pay for investors to keep a close eye on the swiftness with which the government tackles the fixes for the federally run Healthcare.gov.
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The article The 10 States Most Critical to Obamacare's 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. It also recommends UnitedHealth Group. 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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