Healthcare ETFs Get a Booster Shot from Obamacare

ETF Trends

With more Americans now insured under the Affordable Care Act, or colloquially known as Obamacare, the healthcare industry, along with related exchange traded funds, is getting a salubrious injection.

Consumer spending rose $20.4 billion at an annualized rate adjusted for inflation in February, with $13 billion attributed to outlays on health services spurred by Obamacare, reports Jeanna Smialek for Bloomberg.

The Urban Institute in Washington calculated that 5.4 million have acquired insurance since January, which could open pent-up demand for medical procedures and bolster out-of-pocket household spending on co-payments and prescriptions.

“There will be a one-time bump in health spending,” Larry Levitt, a senior vice president at the Kaiser Family Foundation, said in the article. “There’s some new money coming into the system from the government, and we may also see people shifting money away from other goods into health care as they get better access to services.”

Consequently, the share of consumer budgets dedicated to medical care has jumped to a record 17.1% in February from 16.9% in December.

Levitt predicts that bump health-service spending will likely last through May and similar increases could show up next year and in 2016, following the next enrollment windows.

There will be “at least a three-year transition period where we’re ramping up enrollment and health spending,” Levitt added.

The  Health Care Select Sector SPDR (XL.V) is the largest healthcare sector-focused ETF. The fund, though, includes a hefty weight toward pharmaceuticals at 46.3%, followed by biotech 17.9%, healthcare providers & services 16.0% and healthcare equipment & supplies 15.5%. [Health Care Heaven: Sector’s ETFs Flex Their Muscles]

Alternatively, the iShares U.S. Healthcare Providers ETF (IHF) specifically targets healthcare insurers.

Health Care Select Sector SPDR

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For more information on the healthcare sector, visit our healthcare category.


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