WellPoint, Inc. (WLP), UnitedHealth Group Inc. (UNH): Obamacare’s Future? 3 Things to Expect in 2014

What does the new year hold for Obamacare?

The answer to that question depends largely upon whom you ask. Rep. Nancy Pelosi, D-Calif., thinks that the future for Affordable Care Act will be “a glorious thing.” Sen. Ted Cruz, R-Texas, says that millions of Americans risk losing their current health insurance along with increasing numbers of doctors and hospitals opting out of Obamacare.

Regardless of which view proves to be more accurate, there are some aspects about the future of Obamacare that seem more likely than not. Here are three things to expect in 2014.

Rep. Nancy Pelosi, D-Calif. (Source: Wikimedia Commons )

1. More delays
Delays have become standard fare for the implementation of Obamacare thus far. Don’t expect 2014 to be any different. What’s most likely to be delayed in the months ahead?

One possibility is an extension of the open enrollment period past the current March 30 cut-off. Health and Human Services Secretary Kathleen Sebelius recently stated that she doesn’t anticipate any more delays in the implementation of the health reform legislation. However, if enrollment numbers remain well below projections by early March, it wouldn’t be surprising if the White House pushes the deadline back.

The tax penalty for failing to obtain health insurance looks like another prime candidate for a delay. President Obama already temporarily suspended the health reform law’s individual mandate for individuals who had their insurance canceled in 2013. Pressure could quite possibly build in 2014 to make this delay applicable for more Americans.

2. Insurer challenges
No health insurer is more closely linked with Obamacare than WellPoint, Inc. (NYSE:WLP). If you judged the probability of success for health reform solely by how well the big insurance company’s stock performed, the smart money would be on big wins in 2014. WellPoint’s shares soared nearly 52% last year.

However, much of WellPoint, Inc. (NYSE:WLP)’s success stems from the company’s significant presence in Medicaid. Many of the other smaller insurers participating in the Obamacare exchanges can’t make the same claim. Even with the higher enrollment from late December, far fewer Americans have signed up for health insurance than expected. Those numbers need to pick up tremendously for insurers to avoid incurring losses.

A big part of the problem is that the sickest individuals could be the ones most likely to enroll. Concerns about this led UnitedHealth Group Inc. (NYSE:UNH), the nation’s largest health insurer, to opt out of participation in most state health insurance exchanges. UnitedHealth CEO Stephen Hemsley voiced worries that the first wave of enrollees would be less healthy — and therefore more costly.

The clearest sign that insurers are facing stiff challenges in 2014 would be a push by the federal government to modify the risk corridors established to help prevent companies from losing too much from insuring sicker Americans. The Obama administration has already tweaked the risk corridor program to give financial incentives to health insurers for renewing plans that were canceled because they didn’t meet Obamacare minimum benefit standards. More actions along those lines means that things aren’t looking good for health insurers who jumped on the Obamacare bandwagon.

3. Big court decisions
If you think the Affordable Care Act is the settled law of the land, think again. Multiple challenges to the health reform act are working their way through the U.S. judicial system.

The Supreme Court will hear two key cases in 2014 about the Obamacare requirement that employers cover birth control and other reproductive health services. Privately held Hobby Lobby, the plaintiff in one of those cases, maintains that the law’s mandate that it pay for certain birth control drugs that prevent human embryos from being implanted in the womb violates the company owners’ religious liberty.

Other lawsuits that have the potential to greatly undermine Obamacare won’t be heard by the Supreme Court in its upcoming session. It won’t be a surprise, though, if the justices decide later in 2014 to include one or more of these cases on its docket for next year.

The premise of these cases is that the IRS overstepped its bounds in allowing subsidies to be provided for individuals in states that don’t operate their own health insurance exchanges. If the plaintiffs ultimately prevail, this could make the Obamacare individual mandate unravel — since 36 states don’t operate their own exchanges.

Glorious or inglorious?
Events unfolding in 2014 will be pivotal in whether Obamacare becomes the glorious thing anticipated by Rep. Pelosi or encounters a far more inglorious fate. One industry’s fortunes particularly ride on the outcome: hospitals.

Hospital stocks surged as the date for implementation of Obamacare drew nearer. Shares of HCA Holdings Inc (NYSE:HCA) and Tenet Healthcare Corp (NYSE:THC) more than doubled from January 2012 through October 2013. Community Health Systems (NYSE:CYH) soared 145% during the same period.

However, the shares of all three companies have plateaued or faded as Obamacare’s troubles became evident over the last three months. A successful open enrollment could recharge these stocks. More problems, though, could result in hospitals giving up some of those big gains.

We can’t know what will happen in the new year for sure. Yogi Berra, though, hit the nail on the head with his observation: The future ain’t what it used to be.

 

The article Obamacare’s Future? 3 Things to Expect in 2014 originally appeared on Fool.com.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of WellPoint.

Copyright © 1995 – 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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