Blame it on Obamacare. A new report from the federal government finds that the number of Americans without health insurance decreased from 36 million to 29 million in the first quarter this year, a drop of 7 million. It’s the latest in a string of data showing a decline in the number of uninsured in the country, coinciding with the inception of the Affordable Care Act (ACA) nearly two years ago.
The latest report was released by the Centers for Disease Control and Prevention's National Center for Health Statistics, which contained early estimates from the National Health Interview Survey, drawn from polling data from 26,121 Americans. The 29 million uninsured was extrapolated from the survey results, and represents 9.2% of all Americans.
In fact, it is the first time in the over 50 year history of the CDC survey that the number of uninsured Americans was below 10%.
For many, this isn’t a surprise. Seventh Capital’s Monica Mehta is in that group. In her view, the individual mandate of the Affordable Care Act almost assures it.
“People have to get insurance,” she says in the attached video. “You're seeing a lot of increases in coverage really in the area of low income Americans, younger people, and this is with the Medicaid expansion.”
But it’s not just the mandate and poorer Americans who are coming onto the rolls of the insured. “As the economy improves, more people are getting jobs so they’re getting coverage from their employers,” she notes.
The big issue that recent data from the CDC isn’t revealing is what exactly is the cost of these gains. “Are we really seeing costs go down?" she asks. "It’s a wonderful thing that more people have coverage, but at the same time one could argue that were actually diverting a lot of money that consumers could be spending in other parts of the economy to health care.”
While costs to the health care industry since the inception of the ACA are still being figured out, one thing many expect is an uptick in premiums. With rising premiums, and new customers coming into the fold, the insurer stocks have been on fire this year.
M&A has been adding fuel to the insurers as well - take a look at Anthem (ANTM) and Cigna (CI) after their mega-merger was announced. Mehta believes the continuing availability of cheap money could bring more M&A to the space, and likely outperformance for the health insurance stocks too.