Is Obamacare Now the Real-Life Version of "The Walking Dead"?
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It isn't truly alive, but it still moves. It wreaks havoc on those around it. Many run away from it as fast as they can.
You might think we're talking about a hit TV series featuring zombies. Instead, the above description applies to Obamacare. Six years after its passage, the major healthcare legislation appears to be in dire straits.
Is Obamacare now a real-life version of The Walking Dead?
Running to get away
United Healthcare (NYSE: UNH) announced in April that it planned to pull out of Obamacare exchanges in at least 16 states. After losing $125 million in fiscal 2016 on top of previous losses, CEO Stephen Helmsley had enough. He told investors that United Healthcare would only participate in a few states going forward and that the company would have no "meaningful" financial exposure to Obamacare exchanges in 2017.
In July, Humana (NYSE: HUM) revealed that it was withdrawing from Obamacare plans in at least eight states. The Kentucky-based insurer's decision came after losing almost $1 billion from its participation in Obamacare exchanges.
Next, Aetna (NYSE: AET), which hopes to acquire Humana, delivered a double whammy of bad news for Obamacare. In early August, the company stated that it was canceling its 2017 Obamacare exchange expansion plans. A few weeks later, Aetna announced that it was exiting 11 of the 15 state exchanges in which it operated.
It's not just the biggest health insurers that are fleeing from Obamacare. BlueCross BlueShield of Tennessee disclosed on Sept. 26 that it's leaving Obamcare exchanges in the three largest markets in Tennessee. The insurer expects to lose close to $500 million this year from the exchanges.
With both large and small health insurers running away, can Obamacare survive? The answer to the question depends heavily on the outcome of the upcoming elections.
Republican presidential candidate Donald Trump's public position is to repeal and replace Obamacare. Trump hasn't provided many details on what he would replace Obamacare with, but health savings accounts and allowing individuals to purchase insurance across state lines are important components of his healthcare plan.
On the other hand, Democratic presidential candidate Hillary Clinton promises to not only keep Obamacare but to expand it. Her expansion plans include implementing a "public option," a health insurance agency run by the federal government that would compete with private insurers.
Regardless of which candidate wins the presidency, he or she must win support in Congress for any Obamacare changes. At this point, the Senate is potentially up for grabs but the House of Representatives appears to be relatively safe for the GOP.
Look for parts of Obamacare to survive no matter what happens on the political scene. The Obamacare provision that prevents patients from being denied coverage for pre-existing conditions is popular and enjoys support from both Democrats and Republicans. Allowing younger Americans to stay on their parents' insurance coverage until age 26 is another Obamacare feature that's unlikely to go away.
Life beyond for insurers
Investors who poured their money into health insurers back when Obamacare was first passed have enjoyed nice returns. Shares of Aetna and Humana have both more than tripled since then. UnitedHealth's stock has more than quadrupled. What will happen to these insurers and their stocks in a life beyond Obamacare?
If Donald Trump gets his way, health insurers would be able to compete across state lines. That should reduce some headaches for insurers. If some of the current Obamacare restrictions related to required coverage were eliminated, insurers would also likely be able to be more competitive in attracting buyers.
If Hillary Clinton implements her plan, it seems likely that changes would be made to fix some of the current problems with Obamacare. That could help insurers avoid losing a lot of money on the exchanges. However, private insurers could be negatively impacted by the government-operated insurance plan that Clinton wants to implement.
In my view, the best bet is that the major health insurers continue to be successful. They have navigated healthcare changes in the past and came out all right. As for Obamacare, it will either die with parts of it surviving or continue to exist with a different look. Kind of like the zombies on The Walking Dead.
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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.