One recent example of the uncertain future for Medicaid-focused insurers comes from Arkansas. With MacGyver-like creativity, Arkansas Gov. Mike Beebe, a Democrat, appears to have pulled off an unlikely plan to expand its Medicaid program while appeasing its Republican-controlled state legislature. Instead of its existing Medicaid program covering the new members upon expansion, they’ll be sent to one of Obamacare’s new creations, a state insurance exchange, to obtain a policy.
Why could this be bad for Medicaid players? It’s pretty simple — instead of picking up their fair share of these members through the state program, they’ll be forced to compete against commercial insurers like UnitedHealth Group Inc. (NYSE:UNH) that they probably weren’t competing with in the Medicaid market.
Foolish bottom line
For now, the Arkansas plan is unique to that state. However, it’s safe to assume that other politicians are taking notice, and might look to broker a similar deal with the Obama administration. If you’re holding shares in a smaller insurer, it’s probably time to read through an annual report and understand the specific states that your company is exposed to and what the implications of different Medicaid expansion decisions might be.
Or, if you don’t want to worry about state-specific issues, you could invest UnitedHealth Group Inc. (NYSE:UNH), the 800-pound gorilla in health insurance. This company has the broadest reach of any company in the industry, providing a lower risk way to invest in the expanding health insurance marketplace.
The article Will These Obamacare Supporters Get Burned? originally appeared on Fool.com and is written by Brenton Flynn.
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