Few pieces of legislation have been as controversial as the Patient Protection and Affordability Act of 2010. Spearheaded by President Obama, the so-called Obamacare health care reform has met with much friction as it works its way into law. Those who oppose the changes assert that it provides the government with too much control over personal health care and benefits; they see Obamacare as a step toward socialism. Proponents of the legislation believe it will lower health care costs by making it more affordable for everyone.
Clearly, there are compelling arguments for and against this health care reform. But based on the recent Supreme Court decision, it looks like the Affordable Care Act will be the new way health care is handled in the United States.
At the core of the health care change, Medicare will expand to offer coverage to more individuals. When Obamacare is fully functional in 2014, about 20 million additional people will likely participate in the Medicare program. But with states currently spending about $80 billion a year to outsource all or part of Medicare /Medicaid programs, and with more people being added to the program, these costs are projected to reach a whopping $300 billion in just five years. And to help meet this projected cost increase, the large managed-care companies will likely start to purchase other companies already in the business. On July 9, for instance, managed health care plan provider WellPoint (NYSE: WLP) revealed its intentions to buy Amerigroup (NYSE: AGP), the nation's largest private Medicaid/Medicare managed health care company for $4.9 billion. As soon as WellPoint announced this buyout, Amerigroup shares rocketed 38%.
And it's in setups like this one that savvy investors can greatly make monster money. The three stocks below are my top candidates that will likely benefit from Obamacare…
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1. WellCare Health Plans (NYSE: WCG)
This Florida-based company provides managed health care services for government-sponsored programs to about 2.5 million members. It has already started to expand its business by acquisitions. The company recently announced an arrangement with Humana (NYSE: HUM), which acquired Arcadian Health Plan Inc. in April 2012. Under the arrangement, WellCare will have a select assets of Arcadian.
Looking at the stock technically, price has gapped up above the 50- and 200-day moving averages, after a solid downtrend starting in April. After July's gap higher, price remained about 28% higher so far in 2012, compared with the year-ago period. Resistance was hit around $69 a share and price has dropped back to around $65 a share. An opportunity to buy may be setting up here. The first close above $67 a share with stops at $64 would make a great strategy for this stock.