Summer just arrived a few weeks ago. But it’s already been a hot and sticky one for Obamacare.
Source: White House on Flickr.
The most recent heat comes from the decision by the Obama administration to delay the mandate for employers to provide insurance to employees or pay a steep fine. Last Tuesday, a Treasury Department assistant secretary announced in a blog post that the Obamacare employer mandate was being pushed back until 2015. The reasons given in that blog post for the push-back were “concerns about the complexity of the requirements and the need for more time to implement them effectively.”
While business groups cheered the delay, it could now open a Pandora’s box for the administration. The National Retail Federation is pushing for the employer mandate to only apply to companies with 100 full-time employees rather than the 50-employee threshold now in place. Now there is pressure to delay the individual mandate in Obamacare also.
This move by the White House wasn’t too surprising considering a recent report from the Government Accountability Office, or GAO, about the state of exchanges that make up a key component of Obamacare. The GAO found that implementation of Small Business Health Options Program, or SHOP, national online health insurance exchanges was behind schedule in 33 states. That shouldn’t be too big of an issue now with the employer mandate delay.
However, the GAO also found that implementation of individual insurance exchanges is also behind schedule in 34 states. The Health and Human Services, or HHS, department maintains that the exchanges will be ready on schedule in October. The GAO, though, said that whether a successful launch is possible by then “cannot yet be determined.”
Simmering below the headlines
While these two news stories grabbed headlines, a couple of other Obamacare developments didn’t receive quite as much publicity. One involved privately held Hobby Lobby Stores, Inc.. The company sued the federal government over a requirement in Obamacare that insurers cover abortifacients. This requirement applies to Hobby Lobby Stores, Inc. because it is self-insured. Hobby Lobby Stores, Inc. requested an exemption on religious grounds, but the Obama administration maintained that secular organizations didn’t qualify for an exemption.
An earlier district court decision agreed with the White House. However, the 10th Circuit Court of Appeals ruled on June 27 that the contraception coverage requirement violated the company’s religious beliefs. As a result, a temporary restraining order is now in place that protects Hobby Lobby Stores, Inc. from huge financial penalties. While many expect this case or a similar case to ultimately be decided by the Supreme Court, the recent ruling could make it more likely that other for-profit companies will seek exemptions from part of Obamacare.
Another hidden holiday surprise stemmed from HHS’ final rule for some provisions of Obamacare released on July 5. The federal government won’t try to verify whether or not a person qualifies for insurance subsidies. Instead, it will rely on self-reporting. Individuals will be able to provide projected annual household income and insurance status without further verification. HHS says that it “conducted an extensive search” but wasn’t able to find a comprehensive data source that could be available by Oct. 1, 2013.
Hot investing angles?
All of this surely provides plenty of fodder for political discussion. The Motley Fool’s focus, though, is on what the headlines (and stories that don’t quite find their way to the headlines) mean for investors. And there are a few investing implications.
First, delay of the employer mandate could negatively impact hospital chains that were counting on more individuals gaining insurance. That would especially be true if the mounting pressure to delay the individual mandate also succeeds.
Large hospital operator Health Management Associates Inc (NYSE:HMA) dropped 4.4% in the aftermath of the story breaking last week. Tenet Healthcare Corp (NYSE:THC) fell 4.3%. Both stocks have more than doubled in the last year as investors eagerly anticipated full implementation of Obamacare. These tremendous run-ups could lose steam with the delay.
Temporary staffing agencies also felt the brunt of the employer mandate push-back. Shares of Robert Half International Inc. (NYSE:RHI), for example, slipped 5% on the day after the Obamacare delay was announced. The staffing agency reported earlier this year that it was receiving lots of inquiries from employers with around 50 employees, with the implication being that companies would use temporary workers to avoid meeting the 50-employee threshold for the Obamacare mandate.
For investors hoping that financial penalties would hurt Hobby Lobby Stores, Inc. sufficiently to make a planned initial public offering by its rival Michael’s Finer Meats, LLC
look attractive, those hopes probably need to be put on hold. Texas-based Michael’s Finer Meats, LLC, the nation’s largest arts and crafts chain, still plans an IPO after a delay last year.
Look for politicians on both sides of the aisle to push for a better verification system for the Obamacare subsidies. One winner if they succeed could be CGI Group Inc. (USA) (NYSE:GIB). The Canadian information technology firm is heavily involved with development of the federal exchanges as well as several state-run exchanges. More extensive verification means more work for some company. CGI Group Inc. (USA) (NYSE:GIB)’s expertise with the exchange systems make it a good candidate to land the added business.
Overall, the best play for investors with the Obamacare woes looks to be with staffing agency stocks like Robert Half International Inc. (NYSE:RHI). I think that the pullback for temporary staffing agencies will be short-lived. There are plenty of other variables that are influencing companies to use temps rather than hire. Obamacare might be having an abominable summer so far, but for Robert Half International Inc. (NYSE:RHI) and its peers the outlook still looks bright and sunny.
The article Obamacare’s Abominable Summer originally appeared on Fool.com is written by Keith Speights.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Robert Half International.
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