One of the truly funny, if utterly misguided, news stories about Obamacare to emerge this past week was the headline charging the Obama administration with lobbying (also known as ‘advising’ and more realistically known as strong-arming) insurance companies to keep quiet about the twin ugly realities of the Affordable Care Act. Reality (1): millions of Americans are going to have their current insurance policies cancelled, making President Obama, who repeatedly promised otherwise, a liar. Reality (2): forcing these millions of Americans to purchase so-called ‘cadillac’ policies (containing coverage that is much more than the policyholders demand) is going to raise monthly premiums paid by these individuals hundreds of dollars – that’s thousands of dollars per year.
This story was laughable precisely because of how misguided it was. Do you really think that executives working for private health insurance companies have to be told to keep quiet? Are you nuts? They have no incentive whatsoever to explain to literally millions of otherwise relatively ignorant customers that they are going to be forced by the big stick wielded by President Obama and the Democrats who voted for the ACA (literally no Republicans voted for this Act) to buy a product they don’t want at prices that harm them economically. Obamacare has the makings of a sweet political deal like no other in my adult lifetime – forcing tens of millions of young, healthy Americans to buy a product they won’t use at governmentally-enforced high prices.
Lesson 1 in financial investing: buy stock in companies who sell unwanted products at high prices because the government passes a law imposing stiff financial penalties on anyone who breaks the law by not purchasing the specified product. Why? – these companies will experience a huge jump in revenues. However, by itself, this is not sufficient reason to invest. What about costs? What about PROFITS? Think about the cost aspect of what I wrote in the previous paragraph: “forcing tens of millions of young, healthy Americans to buy a product they won’t use…..” Huge jump in revenues, little, if any, change in costs. Think about what this imply about profitability of the firms selling Obamacare policies.
I’m urging everyone who reads this column to buy stock in companies who sell insurance policies on the Obamacare exchanges.