Now that the Affordable Care Act (ACA or Obamacare) has been fully introduced for the insurance-buying public, we decided to look back at the performance of the various sectors potentially impacted by the law since its passage on 3/30/2010. Whatever your feelings about the politics of the bill (and there are many, many feelings to be had across the political spectrum), one basic truth about the legislations is that it will fundamentally reshape the way Americans finance their healthcare.
The chart below shows each sub-industry group in the S&P 1500 for the Health Care sector, as well as two Financial sub-industries that have significant exposure to the ongoing implementation of the law, Life & Health Insurance and Multi-line Insurance. Each index only includes current S&P 1500 members that fall under the respective subindustry classifications and have been trading since March 30th, 2009 (the date of the ACA's passage). Each group of stocks is indexed to 100 as of the ACA's passage, and is weighted by their market cap.
To be sure, this analysis doesn't do a complete job of isolating the law's effects on firms in the business of supporting the market for health care, insurance, and related activities, because those firms would have priced in some of its impact as the law wound its way through Congress to the President's desk. They are also subject to the equity market's macro conditions and myriad other factors. But the dispersion in the table below is pretty clear. Insurers have underperformed while the companies that provide the nuts and bolts of caring for the sick or injured have seen a benefit. The other two groups that have underperformed since passage of the bill are Health Care Equipment and Health Care Services, which is likely due in part to the Medical Device tax, which ultimately pressures margins on these companies' products. From a market perspective, innovation also seems to have made out OK given that both Pharmaceuticals and Biotechnology companies have outperformed.
It's hard to predict how the ongoing phase-in of Presidents Obama's signature piece of legislation will play out in financial markets, but these charts give some insight to how the last four years have played out.
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