By By Kevin Bogardus - 10/01/13 10:00 AM EDT
For investors, the basic calculus is this: The more people who enroll in the new insurance exchanges, the better it is for the hospitals, medical companies and insurers who will gain new customers. [WATCH VIDEO]
“It’s going to have a big impact on insurance companies. It’s going to have a big impact on hospitals. It’s going to have a big impact on providers down the line,” said Tom Scully, a former Centers for Medicare and Medicaid Services Administrator, who is a general partner at investment firm Welsh, Carson, Anderson & Stowe.
Stock shares will rise and fall right alongside the healthcare law, analysts say.
“People on Wall Street are watching closely,” Scully said.
Tuesday marks the beginning of a six-month enrollment period for ObamaCare, which will allow people across the country sign up for health insurance online, through the mail or in person.
The rollout is critical for the law’s success, as the administration tries to drum up enough participation to create functioning insurance markets.
Kim Monk, managing director for Capital Alpha Partners, said investors will be trying to filter out the messaging war that is being waged by proponents and opponents of ObamaCare.
“I’m calling it the spin cycle. Opponents of the law will be looking for additional delays and spin those negatively, while [the administration] will have their positive stories of how many people have gotten on the websites and done their comparison shopping,” Monk said.
She said investors would take a wait-and-see approach before rendering a final verdict.
“I’m not sure that October or November will produce any meaningful data that will change investors’ minds. December might be where the rubber hits the road where we will ask how many people have enrolled,” Monk said.
The healthcare law, with the help of government subsidies, is intended to provide health insurance coverage for millions of people who don’t have it now.
That means new customers for hospitals and pharmaceutical companies, though not across the board.
Lobbyists and analysts said big insurers like Aetna, Cigna and UnitedHealthcare have limited their participation in the exchanges so far. Regional companies, WellPoint, and the Blue Cross and Blue Shield Association licensee, however, have been more aggressive.
“The question for them [big insurers] is, are they missing out on the benefits of a big outreach campaign? That remains to be seen,” said a Democratic lobbyist who advises Wall Street clients who invest in the healthcare sector.
In the 36 states where the Health and Human Services Department (HHS) will fully or partly run the exchanges, there are an average of 53 health plans to choose from. HHS estimates that two or more insurers would have to compete for 95 percent of the consumers.
Some states that are running their own exchanges have already begun to release lists of the insurers they will use. California’s exchange will have 12 insurance companies participating, while Maryland’s signed up 13, and New York’s will have 16.
Investors will be closely watching who enrolls in the exchanges. Older, sicker enrollees would burden the exchanges with extra costs, creating the need for younger, healthier participants to balance things out.
“There is safety in numbers. The bigger the enrollment is, the bigger the risk pool will be,” Monk said.
Analysts are expecting there will be delays in enrollment. In a note sent to investors, Capitol Alpha Partners said there would be “a lag time from when a person submits an application and is enrolled in a plan in 2014.”
The number of enrollees might not be impressive, either. A Citigroup survey of investors found that they believe only 4 million would sign up for the exchanges in 2014, not the 7 million predicted by the Congressional Budget Office.
But some lobbyists are more bullish, saying Obama operatives are applying the lessons of the president’s reelection bid to the enrollment campaign.
“This reminds me of the 2012 campaign when, before the election, the polling indicated that Romney could win because their sampling was all wrong,” said Rich Tarplin, principal for Tarplin Strategies.
“Then the election happened, and we found the Obama people did a great job turning out their voters with micro-targeting and other communications, and I think we will find the same thing will happen with enrollment.”
Others said that they expect the law would work but with some bumps along the way.
“There are going to be glitches. There are going to be significant glitches until next summer,” Scully said. “I don’t like the bill — I think it’s too big, that it offers too many benefits to too many people — but I do think it will work reasonably well.”