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4 Ways Obamacare Will Affect Stocks

The Affordable Care Act is becoming a reality, and these stocks are going to be the first to notice its effects (if they haven't already)

health stocks and your portfolio
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#3: The Housing Market Will Cool Considerably Under Obamacare

To give credit where it’s due, Ethan Roberts first made the detailed argument. But the gist of his premise is simply that because of the higher costs of healthcare (one way or another) under the Affordable Care Act, people are now being forced to choose between spending to own a home, or spending on healthcare/insurance.

It’s not just higher premiums or higher deductibles (or both) that are going to reduce the amount of income available to spend on home ownership, however. Incomes are dropping too, as hours worked per week are apt to keep slipping from the standard full-time 40 hours to less than 30 per week; employees who work less than 30 hours per week aren’t required to be covered by employer health plans.

With weaker incomes on tap, homebuilder stocks like Lennar (LEN), KB Home (KBH) and D.R. Horton (DHI) are going to be under a growing amount of pressure as Obamacare gets more and more traction.

#4: Hospitals Will Either Soar or Stumble … Nothing in Between

The impact of Obamacare on hospitals — not HMOs, but hospitals themselves — has been hotly debated. Some argue that the Affordable Care Act will prove beneficial to hospitals because more patients will now have insurance coverage, and since they have insurance, they’re more apt to visit and incur care that leads to reimbursement from an insurer.

The counterargument is, the ACA reimbursement schedule for hospital care is so stingy, it’s going to be tough for a hospital to turn an actual profit. The dividing line is quality of care — hospitals that can provide quality care and in a sense (ironically) reduce volume stand to fare better than facilities that offer poor service or aren’t cost-efficient.

So how does Obamacare distinguish between high-quality and low-quality care? A section of the ACA known as the Readmissions Reductions Program is one such way. The program tracks reasons for patient entries into healthcare facilities, and if a patient was discharged less than a month earlier and is returning for the same reason, stiff penalties could apply. Patient satisfaction surveys will also play a role in how — or if — a hospital is reimbursed.

Point being, hospitals that are thorough, conscientious and cost-effective will find Obamacare to be something of a blessing.

There are few publicly traded, pure-play hospital stocks left that can dependably dole out quality care. HCA Holdings (HCA) and Community Health Systems (CYH) are two hospital names investors can probably trust.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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