Will Obamacare Attract Shoppers Black Friday Weekend?
One would seldom find insurance on the shopping list of consumers lining up to grab the best Black Friday deals. This year, however, health insurance will likely find a place among other interesting items on the shopping list of Americans hitting the malls on Black Friday, Small Business Saturday and Cyber Monday.
The Department of Health and Human Services (HHS) has come out with an innovative plan, roping in Westfield, the country’s largest chain of malls, in an effort to reach out to people and enlighten them about enrolling through exchanges, on these busy shopping days.
The HSS has also partnered with more than 23,000 local pharmacies spread across the country, which are a part of the National Community Pharmacy Association.
The department has gone a step ahead and partnered with a media company called the XO Group, which provides products, information and services to newlyweds and first-time parents.
Targeted Marketing
HSS has chosen the beginning of the holiday shopping for its campaign, since these days are traditionally the busiest shopping days and HSS expects to capitalize on the huge footfall at the malls.
It may be the perfect time to target young adults, one of the prime enrollment targets. The insurance exchanges need more young people to sign up to balance the older population that signed up last year. Higher youth enrollment (since most of them are perceived healthy) would cover the costs and risk involved in providing coverage to the old and the sick, thus improving the odds for insurers and balancing out costs.
Why the Extra Effort?
The fact that there is still a significant uninsured population out there is actually not so encouraging. The way this time HHS is reaching out to potential customers is in stark contrast to last year when the health insurance exchanges debuted. While last year celebrities and high profile figures were roped in to endorse the products, this year they are directly reaching out to people.
This direct marketing campaign also makes sense as the enrollment period this year is much shorter (3 months from Nov .15 to Feb. 15, 2015), compared with the buying period of more than six months (from Oct 1, 2013 through April 19, 2014) last year.
Again, a still-low level of awareness and clarity among people about how to get policies from the health insurance exchanges necessitates this marketing effort. According to Kaiser Family Foundation, a non-profit organization focusing on national health issues, almost 90% of the uninsured do not know when enrollment begins while two-thirds know little or nothing about exchanges and the subsidies that make health plans more affordable for qualified buyers.
Moreover, a frenzied holiday season continuing through December will keep Americans busy with shopping, thereby making it even more difficult to draw them to exchanges to shop for insurance. This practical approach will come in handy and send a reminder to the uninsured and those qualifying for renewals.
This year’s open enrollment is further complicated by the extra work needed to update the financial information of the previous buyers.
Insurers Poised to Gain
Private insurance companies sell their plans on Obamacare exchanges. They are becoming increasing responsible for the successful implementation of the Affordable Care Act (:ACA). While insurers were initially skeptical as to how the first enrollment session on public exchanges would fare and kept a low profile, most of them had a net positive experience. Following their favorable initial experience, insurers are expanding their presence on federal exchanges in a number of states this season.
While it was prudent for insurers to follow a wait and see approach in the early days of the Obamacare exchanges, sitting on the sidelines now will be like leaving money on the table.
We would like to focus on a couple of health insurers who have expanded their public exchange presence and are poised to benefit from higher membership expected in the second enrollment season. For 2015, the non-partisan Congressional Budget Office has estimated that 13 million people will sign up. The U.S. Department of Health and Human Services, however, has forecast total enrollment of 9.1 million. In the first open enrollment session, just over 7 million people signed up for insurance.
Top Picks
We believe the recent development will provide an opportunity to add some stocks with promising returns to one’s portfolio. We would recommend the two stocks mentioned below, which also have a favorable Zacks Rank.
UnitedHealth Group Inc. (UNH) is our first pick as it has emerged as a bigger exchange player this time. This company, with a Zacks Rank #2 (Buy), has expected EPS growth of 10.2%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 17.4.
The insurer expanded its presence on public exchanges to 23 states from 4 states during the first enrollment session. It has a presence in all states where the HSS had tied up with Westfield mall namely Florida, Illinois, New Jersey, Connecticut, Maryland and New York, with the exception of Washington. The insurer is also competitively priced in key markets making it the best choice for customers.
WellPoint Inc. (WLP) also with a Zacks Rank # 2 is another company worth mentioning and has expected EPS growth of 10.2%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 14.4. It is reported to have added 769,000 customers from the public exchanges in the first enrollment session and they have turned out to be less expensive than initially anticipated.
WellPoint is an exception to other players who followed a reserved approach, as it competed for exchange customers in all 14 states where it does business. In the first enrollment session, it was the most dominant player and this is expected to continue in the second session, given its competitively priced plans and broad-based presence in the states where Westfield malls and National Community Pharmacy stores are located.
Bottom Line
We, however, are not sure about whether shoppers waiting throughout the year to grab discounted shopping deals will at all be interested in visiting health insurance kiosks at the malls. However, the effort will surely catch their attention and help create awareness among the uninsured.
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