ACA: The Winner and Losers

No doubt, there will be winners and losers once the Affordable Care Act (ACA) is fully implemented.

On the consumer side, some will pay more (young folks) and some will pay less (older folks).

On the servicer side, some companies will benefit from the law, while others will be hurt by it. And unfortunately, there are still too many unknowns for us to determine which companies win and which lose.

We can speculate, of course.

Try this logic on for size…

Hospitals receive much of their income in the form of reimbursements from insurance companies. So more insured patients should mean more patients going to hospitals, which should translate into more income for hospitals.

Likewise, health insurance companies make those payouts. Usually, their actuaries do a great job of estimating how much they’ll have to pay out, allowing them to set premiums that ensure the company can be profitable.

However, with all the uncertainty regarding the new law, and how patients will react, these insurance companies could be in for a big surprise, brilliant actuaries or not.

Here’s a chart showing the five largest (by market cap) publically-traded hospitals and the five largest health insurance companies.

See larger image

Since June 2012, when the U.S. Supreme Court upheld ACA, all five hospital stocks have outpaced the health insurance providers’ gains.

Will this trend last? Will the gap widen? Or are health care investors in for a wild, volatile ride as these companies navigate uncharted waters?

These are questions we’ll look to answer as the ACA debate intensifies. Stay tuned.

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Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.