Will Obamacare Happen Smoothly? - Analyst Blog


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A phone survey conducted in early May shows that 64% of uninsured Americans are still undecided about signing up for the Affordable Care Act (ACA). Conducted by InsuranceQuotes.com, the survey also reveals that more than two thirds of respondents in the low income group are unsure about whether they will be eligible for tax credits which will subsidize the cost of purchasing insurance.

According to the phone survey of 1,001 adult Americans, almost half of the respondents think the new system will make it tougher for them to get tests and procedures done on time. On the whole, the report raises serious doubts about the ultimate success of "Obamacare."

This is because if enough citizens do not sign up for the ACA, it could end up significantly raising the costs of health insurance. The reason for this is that the benefit payouts to the sick cannot be offset if enough healthy individuals do not purchase insurance as per the program.

The situation is compounded by the 68% with low incomes who are undecided about signing up, though they will benefit the most from ACA. It is they who would receive the largest share of the subsidies.

And this despite the fact that the purpose of "Obamacare" was to widen the safety net, bringing more Americans under the umbrella of health insurance. A large number of citizens would have to pay federal penalties if they do not purchase insurance as per its provisions.

Healthcare ETFs were expected to benefit significantly from health care reform. As of now, they remain an excellent option for the investor. Most have exceeded the performance of the S&P 500 this year. The SPDR S&P 500 ( SPY ) has increased 10.50% over the last three months. On the other hand, the Health Care Select Sector SPDR ( XLV ) has gained 15.87% over the same period.

The story is much the same for quite a few other healthcare ETFs. The Vanguard Health Care ETF ( VHT ) increased 15.70% over the last three months. The iShares Dow Jones US Healthcare ( IYH ) is up 15.82% over the same period.

The primary issue which may be hindering the enrollment of the ACA seems to be the lack of education. An analyst at InsuranceQuotes.com feels that many individuals are "confused and uninformed." The reason for this is possibly the fact that the new system requires much detail and is quite complicated.

This lack of information could ultimately lead to a lot of pain for those who decide not to sign up for the ACA. Any major illness would result in substantial out-of-pocket expenses. It would also result in significant losses for insurance companies providing coverage via exchanges mandated by the ACA.

There are, of course, contrarian views. A medical business advocacy manager of the Kentucky Medical Association believes that the complexity of the system created by "Obamacare" would involve substantial costs and discomfort in the beginning. But, over time, it will significantly increase the efficiency of the medical records and billing system.

The need of the hour is greater dissemination of information about the new system. Another major requirement is assistance for the uneducated and uniformed that are having trouble completing the paperwork required to be part of the system. Only then will "Obamacare" succeed in achieving in what it has set out to do.

ISHARS-DJ HLTHC (IYH): ETF Research Reports

SPDR-SP 500 TR (SPY): ETF Research Reports

VIPERS-HLTH CR (VHT): ETF Research Reports

SPDR-HLTH CR (XLV): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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