What we may actually be seeing is the same gun-shy approach to approving medical procedures and medications among insurers as we’ve seen in the hospital sector. Yet again, the culprit appears to be the uncertainty surrounding whether a large number of currently uninsured people will remain uninsured. WellPoint, Inc. (NYSE:WLP) made a $4.5 billion bet by purchasing AMERIGROUP last year that it would gain a significant number of currently uninsured low income individuals under the proposed Medicaid expansion. If these people don’t sign up for health insurance, then WellPoint, Inc. (NYSE:WLP)’s purchase will have been for naught.
In order to do their best to conserve cash leading up into the full implementation of the bill, I wouldn’t be surprised to see insurers denying or declining to pick up the tab on what they deem overpriced procedures. Not to pick on Intuitive Surgical, Inc. (NASDAQ:ISRG) again, but the company did mention, “a trend by payers toward encouraging conservative management and treatment in outpatient settings.” Another potential victim here is Dendreon Corporation (NASDAQ:DNDN) , whose cellular immunotherapy known as Provenge that’s used to treat advanced prostate cancer costs $93,000 annually. By comparison, Johnson & Johnson (NYSE:JNJ)‘s Zytiga costs just $5,500 per month ($66,000 annually) and would be the better cost-effective choice for insurers, potentially leaving Provenge out in the cold.
3. The push to part-time employment is a lot bigger than we thought.
It hasn’t been a secret that a select few businesses were going to use the scope of the PPACA to their advantage and kick their current and new hires below the 30-hour threshold defined as full-time employment. What’s surprising is that many those “few businesses” are turning out to be America’s largest employers.
Under the PPACA, businesses of 50 or more employees (defined as medium or large businesses) are required to supply health care options to their employees. While they aren’t required to subsidize the cost of their employee’s health care premiums, they do run the risk of being fined from $2,000 to $3,000 per employee for each instance of premium costs totaling more than 9.5% of an employee’s income. As you can see, for the nation’s largest companies that don’t already have universal health benefits in place (e.g., Costco Wholesale Corporation (NASDAQ:COST)), this could be a costly dilemma.
Despite a survey conducted by the Federal Reserve Bank of Minneapolis in March that indicated only 4% of respondents had altered their hiring habits to part-time or cut workers’ hours in response to the coming implementation of Obamacare, the repercussions on take-home income and health care availability are huge if this 4% represents any of the U.S.’s largest employers.
Take Wal-Mart Stores, Inc. (NYSE:WMT), for example, which in 2011 told future employees who work less than 24 per week on average that they’d no longer qualify for health care. In addition, it removed spouses from its insurance plan coverage for those who worked 24 to 33 hours on average per week. You might be thinking, “OK, so this is just Wal-Mart Stores, Inc. (NYSE:WMT) being Wal-Mart Stores, Inc. (NYSE:WMT)!” But remember, prior to Obamacare being passed, Wal-Mart Stores, Inc. (NYSE:WMT) did hire full-time employees. And, most importantly, it is still the No. 1 retail employer in the U.S. with 2.2 million employees!
Don’t be fooled by the relatively small number of employers that are cutting hours. Instead, note the size of the employers that say they are cutting hours and you’ll understand better why that’s a big concern with regard to consumer spending growth and the unemployment picture.
The article 3 Surprising Repercussions of Obamacare originally appeared on Fool.com is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Costco, Intuitive Surgical, Johnson & Johnson, and WellPoint. It also owns Dendreon.
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