Profiting from Obamacare Fears

Brian Hicks

Updated August 7, 2013

It’s time to look at Obamacare in a new way. It doesn’t matter if you’re for it, against it, or don’t care about it. What matters is how you can benefit from it as an investor. We’re thinking about banking on the negatives and positives of it to win.

It’s no secret that Obamacare has received a lot of opposition. It’s going to change the way people are insured and the way companies are able to insure their employees. Most people hate change, no matter what it is, but the problem with this change is that it’s costing people a lot of money.

dr. obamaStarting in October, people will need to purchase health insurance through state-based exchanges. While people in some states, such as New York and California, may see premiums decrease, many other Americans may see their premiums rise significantly. Florida expects to experience a 35% average increase in premiums. Ohio reports there may be a 41% increase in premiums, as CNNMoney shows.

What’s causing the increase? Americans must pay for insuring others. Every American will be required to have health insurance, and that includes people with pre-existing conditions. What that means is that more people will need insurance companies to pay for them to receive medical care, and that puts pressure on those insurance companies to increase premiums to help them stay financially afloat.

It doesn’t sound fair because it’s not really fair. Just like it’s not fair that a 21 year old man will most likely pay more for an exchange health care plan, while a 42 year old woman or 62 year old man will pay less for better services.

The government has tried to stop all of the chatter about health insurance costs soaring. Kathleen Sebelius, the Health and Human Services Secretary, says that the information everyone is receiving is factually incorrect.

She also reports that in September, the government will release the truth about the costs of Obamacare. The issue is that everyone is anxious about it, and they want to plan for the changes, but the government isn’t being transparent enough.

What Does This Mean for Investors?

With the information Americans are receiving right now, most are already starting to think about what they are going to do, and anticipating what they will do can tell you where to invest. It’s estimated by the CBO that three to five million employees will lose heath care, with as many as 20 million people losing their insurance by 2019. That means many of them will end up either on Medicaid or searching for private health insurance.

Pharmaceutical companies have already prepared for the bomb of Obamacare. They have increased the prices of name-brand drugs so they can make as much money as possible before it hits.

Once Obamacare comes, generic drugs will receive the limelight. They already make up 70% of all prescriptions, and since they are lower-priced than brand names, they will be what everyone (patients, government programs, and private health insurances) will push.

Out of all the generics, there’s one type that will end up benefiting the most from Obamacare – biosimilars.

Biological processes instead of chemicals create these types of generics. They are mostly used for cancer, rheumatoid arthritis, and cardiovascular conditions. It’s expected that health care reform will speed up the process of biosimilars to meet the needs of low cost generics.

With the anticipation of the acceleration in biosimilars, you may want to start considering TEVA Pharmaceuticals (NYSE: TEVA). The company is the largest manufacturer of generic drugs.

Private health insurance companies will be ready to take in all of the people that lost their employers’ health care options. Two of the biggest names in private health insurances that will see an increase are Aetna (NYSE: AET) and United Health (NYSE: UNH).

Let’s critically think about how hospitals will benefit from Obamacare to come up with the next investment opportunity. As it is now, many people who need emergency medical care will go to a hospital uninsured. Since they can’t pay for their care, the hospital ends up eating the cost of it. With Obamacare, hospitals will no longer have to deal with the deficit, which increases profitability. Good options are HCA Holdings (NYSE: HCA) and LifePoint Hospitals (NASDAQ: LPNT).

And the last areas that could see huge profits from Obamacare are those that have to do with the technological advancements in medical records. To cut costs, the health care system has required doctors, hospitals, and pharmacists to file medical records electronically, boosting the profits of companies providing the software and tools for it such as Cerner (NASDAQ: CERN).

How does Obamacare feel to you now? It’s likely you’re pretty excited about it from an investor standpoint. It’s going to fuel the growth of many companies, and you should be getting a kickback from it if you choose to invest in them.


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