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UnitedHealth Group Inc. (UNH), Aetna Inc. (AET), Health Management Associates Inc (HMA): Obamacare Heads for the Hills….of Arkansas

Only one hurdle remains for Obamacare to head for the hills — the hills of Arkansas, that is. The state’s House of Representatives passed a bill on Tuesday to go along with the a key part of the Patient Protection and Affordable Care Act, or PPACA. Arkansas’ Senate takes up the measure next, where it is expected to pass.

Half of the states have already opted to expand Medicaid according to ACA provisions. Why is Arkansas’ move a big deal? The answer lies in the details of the legislation that actually passed.

UnitedHealth Group Inc. (NYSE:UNH)

A few Ozark twists
Several states controlled by Republican governors and legislatures have resisted moving forward with expanding Medicaid. Part of the reluctance stems from fears that federal funding could dry up in the not-too-distant future leaving states stuck with the bill. Some conservatives also oppose expanding Medicaid due to the serious financial challenges facing the hybrid federal-state health program.

The Arkansas plan, though, contains a few twists that addressed these concerns and enticed the Republican-dominated state House to approve the measure by a vote of 77 to 23. Most strikingly, this “Medicaid expansion” won’t actually expand Medicaid. Arkansas residents who earn up to 133% of the poverty line will be able to purchase private insurance with government dollars through a health insurance exchange rather than enroll in the state Medicaid program.

Another key aspect of the deal is that Arkansas governor Mike Beebe, a Democrat, included a provision under which the plan expires in 2017. That allows the state legislature to assess how well things worked out before renewing the program — and before Arkansas must begin paying part of the cost.

Moving mountains?
There isn’t much for investors to get excited about with this development at first glance. Sure, several publicly traded companies should like the news. For example, UnitedHealth Group Inc. (NYSE:UNH) and Aetna Inc. (NYSE:AET) sell insurance in Arkansas. These insurers could potentially pick up additional business.

Community Health Systems (NYSE:CYH) operates eight hospitals in the state. Health Management Associates (NYSE:HMA) also operates a couple of Arkansas hospitals. These hospitals could benefit with fewer uninsured patients.

However, the Arkansas market size isn’t enough to make a major impact for any of these companies. What could be worth investors’ attention, though, is what impact the Arkansas precedent might have.

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