Monday, May 25th, 2020

Can You Make Money on Insurance for Everybody?


It is OK if you are confused about who is suggesting insurance for everybody. It is not the Socialist Bernie Sanders but billionaire capitalist turned President Donald Trump who is talking about replacing Obamacare, insuring everyone and beating big pharmaceutical companies into submission to lower the costs of drugs.

President-elect Donald Trump said in a weekend interview that he is nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody,” while also vowing to force drug companies to negotiate directly with the government on prices in Medicare and Medicaid.

The question for stock traders is can you make money on insurance for everybody? Who would the winners be and who would lose. Is buying or selling stocks a good idea? Or should you engage in options trading to stake out your positions at lesser cost?

Insurance Companies after the Demise of Obamacare

To convince insurers to participate in the affordable care insurance market a tried and true method to reduce risk was proposed, the same one that worked in 2006 under Bush to create a stable Medicare drug market. The problem is that that congress did not fund the risk pool, providing only 12% of what was owed insurers. Thus the insurers increased premiums. The problem for insurers is that they had to add legislative risk to the normal insurance risks. When congress goes ahead and defunds Obamacare one of two things will happen. Twenty million people will be without insurance or insurance companies will fold up. How does insurance for everybody fit into this picture?

Drug Makers

Drug companies make drugs in order to make money. People buy drug stocks in order to fund their retirement, send their kids to college or simply put more assets away for a rainy day. If drug companies cannot make money their stocks go down. Puts on drug makers as well as insurance companies might just be a good idea.

Canadian Model

The way that countries like the UK or Canada address the issue of health care is that everyone has the right to care and everyone has the right to wait or pay more for prompt attention. The easiest way to provide insurance for everybody is to slim down the benefits. For example, years ago in the UK when a man over age 60 was diagnosed as having a heart attack he was sent home on bed rest with daily visits by a doctor and/or nurse. The majority of people did just as well as if they had been hospitalized and at a substantially lower cost. And the ones with complications died without the government incurring extra expense. If the USA goes that direction it will mean less business for hospitals, doctors, insurance companies and even drug companies because the government simply will not be paying for all of those IV meds given in a crisis on the hospital coronary care unit, cancer unit or other specialized facilities. And the handful of hospitals and insurance companies that cover the well to do will make money.

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