Will Employers Drop Health Coverage? What Stocks Benefit?

According to Deloitte Consulting in a study to be released today, 10 percent of U.S. employers plan on dropping healthcare coverage for their workers in coming years. This comes as a result of required coverage and expected increased cost arising from implementation of the Affordable Care Act. McKinsey & Company, another consulting firm, last year reported that an even-more-dire 30 percent of companies would drop coverage. Traders will attempt to develop strategies around this. Will healthcare plan companies be affected? Hospital companies? Major drug companies? Generic drug manufacturers? What happened when the Massachusetts health care insurance reform law was enacted in 2006? Did companies drop coverage then? Here are some facts to help decide: A recent study by the Blue Cross Blue Shield of Massachusetts Foundation found that between 2006 and 2010, the use of emergency rooms for non-emergency reasons fell nearly 4 percent. 68 percent of non elderly adults received coverage through their employers in 2010, up from about 64 percent in 2006. The study also found no evidence to support the fear that employers or workers might drop coverage because of the availability of public coverage. Massachusetts State health officials said “Increases in mammograms, colon cancer screenings and prenatal-care visits and a 150,000-person reduction in the number of smokers after the state expanded coverage for smoking-cessation programs.” Gov. Deval Patrick of Massachusetts has said, “more private companies are offering health care to their employees, fewer people are getting primary care in an expensive emergency room setting.” A study by the fiscally conservative Beacon Hill Institute concluded that the reform was "responsible for a dramatic increase in health care spending." However, the state's hospitals that care for lower-income urban residents said “They have been hard hit by the ongoing transition that is a central component of the state's healthcare reform law.” When Looking at the largest companies in healthcare, on a CAGR basis for 2005, 2006, and 2007, some trends emerge. Major drug manufacturers did well in 2006 and most continued that trend. Health care plan stocks trended down in 2006, then adapted and improved in 2007. Hospitals stocks trended down and stayed there. Generic drug manufacturers trended down with hospitals.