This post is by Chris O'Brien from footnoted*
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If there’s anything corporations hate more than change and competition, it’s uncertainty.
But facing the unknown is exactly where thousands of companies find themselves now that the Trump Administration seems to have abandoned its efforts to repeal The Patient Protection and Affordable Care Act of 2010, known better as “Obamacare.” The signature policy achievement of the Obama Administration has been the subject of endless political debate over its effectiveness pretty much since it was proposed and passed.
We’re not interested in rehashing the politics here. But no matter how one feels about Obamacare, it’s been clear to us here at Footnoted that companies from a wide spectrum of industries have been anxious about the repeal efforts as well as the lack of clarity about what would come next. Indeed, since the start of this year, and through the recent 10-K filing season, it became rare to read a filing that didn’t include
disclosure about the risks involved should the law be repealed.
To measure this, we went back and searched all filings since 2009, when Obama took office, for references to the bill and law. We searched specifically on the phrase “Affordable Care Act.” This is an imperfect method, given that various companies refer to it as “Obamacare” rather than its official name. But it still offers a picture of how Obamacare has weighed on companies over the years.
While some parts of the law took effect in 2010, many of the most critical parts were launched in 2014, including the health care exchanges and Medicaid expansion. After a surge of filings mentioning Obamacare as it went live, it seemed that corporations were just starting to reduce their fears about it in 2016:
But through the first three months of this year, that number has already hit 1,991 disclosures, putting it on a pace to hit close to 8,000 this year.
As one would expect, among those expressing concerns were health insurance companies, including, LifePoint Health, Tenent Healthcare, and Aetna. In particular, Aetna captured many of the common fears among the insurance providers when it noted in its recent 10-K that it’s worried about the uncertainty surrounding Obamacare’s future, whether or not it is fully repealed:
“If the ACA is not amended or repealed, certain aspects of the ACA as currently enacted have yet to take full effect, are unclear, or are subject to effective amendment through the implementation process, making their practical effects difficult to predict. Our business and operating results may be materially and adversely affected by the ACA and/or changes to the ACA even if we correctly predict their effects.”
There is a fear about unpredictable pricing on the healthcare exchanges. But primarily, the great worry is that any steps taken could substantially reduce the number of insured in the short-term, essentially cutting out a chunk of their new customer base.
The pharmaceutical industry also weighed in with similar fears. Typical was a disclosure that Neurocrine Biosciences added about the added layer of unpredictability introduced already by executive orders signed by President Trump to limit some aspects of Obamacare. Repeal or not, the company said it was going to be harder to forecast sales of its drugs in the coming months if it couldn’t be reasonably sure how many people might (or might not) lose their insurance.
Indeed, across the healthcare economy, companies that provide support services, run nursing homes, make medical devices, or, like Blackstone Group, invest in a wide range of these businesses, felt obligated to make disclosures this year about Obamacare’s future.
But the handwringing went far beyond just immediate health-related businesses. For instance, Robert Half International simply worried that no matter what happened, the surrounding debate was likely to result in higher health care costs which could in turn impact hiring.
That nervousnesses rippled all the way out to such unlikely corporations as The Cheesecake Factory, which wrote in its recent 10-K:
“a great deal of uncertainty exists with respect to the future of PPACA. Any significant change to the healthcare insurance system, including a dismantling of PPACA in whole or in part and/or implementation of a supplementary and/or replacement healthcare insurance system, could impact our healthcare costs. Material increases in healthcare costs could materially adversely affect our financial performance.”
None of this uncertainty is likely to clear up soon. President Trump continues to tweet that he’s going to sit back and wait for Obamacare to implode. Maybe it will, maybe it won’t. But corporations will need to continue weighing the risks involved in the current health care system and will be left to guess whether it will indeed destabilize, and what actions, if any, politicians might take if they need to step in.
In other words, the guessing game will continue.
Over the coming year, we’ll be watching to see whether that forces these companies to adjust plans for things like hiring and investment. If that happens, the economic and political calculations surrounding Obamacare’s future could shift dramatically again.