Companies reveal new health law's financial impact

Dozens of firms weighed in on the ACA during earnings reports, and the results are mixed.

By MSN Money staff Feb 25, 2014 1:52PM

Healthcare application & stethoscope © Steve Hamblin/Fuse/Getty Images
By Noelle Knox, The Wall Street Journal

Wall Street Journal on MSN MoneyThe Affordable Care Act's impact on the bottom line is starting to ripple across corporate America.

More than 80 public companies told investors the new health-care rules were, or could be, a financial boost or drag on their quarterly earnings, though they were often uncertain of the magnitude, according to a Wall Street Journal search of earnings-call transcripts for the most recent quarter provided by FactSet.

The Congressional Budget Office's most recent estimate of the ACA's budgetary impact is $1.36 trillion between 2014 and 2023. The financial effects on businesses are evolving as changes are made to the legislation, including a decision this month to again delay when many smaller companies will face a fine if they fail to offer health insurance.

But some trends are emerging.

In general, media and advertising companies and staffing and outsourcing firms are clocking gains. Insurance providers are investing heavily now in technology and staffing—and taking a hit to earnings — in anticipation of future gains.

And many large employers across industries are spending more on insurance benefits for full-time employees or on training for new, part-time employees who won't necessarily be entitled to company-sponsored coverage.

Several advertising and communications companies, including Emmis Communications (EMMS) and LIN Media (LIN), said they will register increases in spending on advertising and outreach campaigns to encourage enrollment through the new state and federal insurance exchanges.

Emmis is forecasting a 12 percent to 15 percent increase in health-care advertising this year, and up to 20 percent of that is expected to come from ACA-related advertising from insurers, hospitals and state-government agencies, Patrick Walsh, chief financial officer at Emmis, said in an interview.

The Indianapolis-based company's two biggest markets are New York and California, both states that have rolled out health exchanges. Mr. Walsh said Emmis's biggest radio stations are the hip-hop-music Power 106 and Hot 97, which target young, urban minorities. "Our audience is an attractive target for the exchanges," he noted.

Oscar Insurance, for example, ran radio ads on Emmis's New York City Hot 97 radio station in conjunction with a Twitter and Facebook campaign to attract customers.

"Right now, the ACA-related spending is showing up in two places, as political advertising or as health-care advertising. But I foresee it becoming a completely new category as the space develops," said Edward Atorino, a media analyst at Benchmark. "The bigger markets have national TV covering them, but for the smaller ones, there is a real need to get the information about exchanges out there by telling people about the locations and phone numbers."

At the same time, employment-benefit and IT companies, such as Virtusa (VRTU) and Automatic Data Processing (ADP) say they are seeing more business as they help clients comply with the ACA's demands.

Virtusa, an IT consulting and outsourcing company based in Westborough, Mass., said that increased spending from health-care clients helped boost its fiscal-third-quarter operating profit 14 percent from the previous quarter.

Insurers and health-care providers are streamlining their IT infrastructures and revamping websites to provide more data to customers, said Ranjan Kalia, the company's CFO, adding, "We believe that this is a market driver."

However, he said Virtusa has also had to spend more to bring its own benefit plans for employees into compliance with ACA demands. He estimated Virtusa could spend "a few hundred thousand dollars" more on health care for its 900 U.S. employees when it renews its plans this summer.

Dozens of other large employers also warned investors that the cost of complying with the ACA will be sizable. United Parcel Service (UPS), Pantry (PTRY) and J&J Snack Foods (JJSF) are among the companies that detailed the likely financial hit for broadening benefits coverage.

Pantry, which operates Kangaroo Express convenience stores, said the company hired 800 part-time employees late last year and spent an additional $700,000 on training. The new employees won't be eligible for company-sponsored health-care benefits.

Nevertheless, Pantry will spend up to $8 million more a year on health-insurance costs related to the ACA for its 6,600 full-time employees, said CFO B. Clyde Preslar.

J&J Snack Foods, maker of Super Pretzels and Icee frozen drinks, cautioned shareholders it will spend an additional $600,000, or $0.02 a share, this year on health-insurance coverage for its 3,300 employees.

But repeated changes in the law have made CFO Dennis Moore cautious about the financial impact. "The law keeps changing. That's another unknown. Who knows how many times it's going to change?"

Last week, Wal-Mart Stores (WMT) said health-care expenses were a "headwind" last year and will continue to be this year. The company said "higher than anticipated" enrollment in its health-insurance program put "pressure on our benefits expense."

Widespread technical problems late last year with the health law's new online marketplaces helped push down enrollment for health-insurance companies offering plans on the government-backed websites, including Cigna (CI) and WellPoint (WLP).

In addition, the risk profile of the new enrollees has been skewing toward somewhat older, potentially higher-cost people, which could be a concern for the health plans' future earnings. Indeed, Cigna, Humana and Aetna (AET) have all said that they expect to lose money this year on their public-exchange business.

WellPoint said the ACA would have a $100 million "unfavorable impact" on its earnings this year.

It said it would spend $300 million upgrading its computer systems, hiring 1,000 full-time employees and paying for advertising and outreach. Most of that money was spent in the fourth quarter, but the insurer held back some marketing dollars because of the slow launch of the federal health-care website.

— Vipal Monga, Saranya Kapur and Anna Mathews contributed to this article.

More from The Wall Street Journal

Feb 25, 2014 2:27PM
Wait until all the delayed mandates are fully enforceable.  Only then will we all realize the full extent of the devastation caused by Obamacare.  Interesting how many of the mandates were delayed until after the election - must just be a coincidence.
Feb 25, 2014 2:45PM
Obama has said one lie after another. 
You can keep your doctor - lie
everyone will save money - lie
we will close Guantanamo - lie
we wont torture people - lie
we will close CIA black sites - lie
we wont conduct secret wars in undeclared battlefields - lie
we wont kill american citizens without due process - lie
we will get big money out of elections - lie

Both conservatives and liberals have plenty to be angry at with all the lies this president is telling us.
Feb 25, 2014 3:15PM

Here I will sum up the truth behind ObamaCare:

-millions lost their policy and did not sign up

-will cost about 500,000 people their jobs

-created a monopoly and made Obama's friend rich

-let Obama's friend design the website and made him rich

-first time ever tax for not buying something (broke law)

-made the nation more divided than ever

-made some democrats turn on Obama

-will make Obama go down as worst president ever.


Oh yah I forgot this story will make BRENT or what ever account he is using to post 40 worthless post supporting his false god.

Feb 25, 2014 2:42PM
Obamacare was designed to separate people from their insurance: cancelled plans, employers pushing people to the exchanges to save costs, rising premiums for families, etc.  The hope was that people would clamor for the Holy Grail of Statism: single-payer.  Because, as we all know, monopolies are ALWAYS best and politicians NEVER squander money. 
Feb 25, 2014 2:45PM
What about all the money Obamacare is taking out of the average Joe's pocket?  With stagnant wages and less disposable income, the economy will hit a wall soon. 
Feb 25, 2014 2:51PM
Funny how obummer is moving mandates to AFTER the 2014 elections.
Feb 25, 2014 2:52PM
President Obama is making illegal adjustments to the ACA to help the fools that voted for it for the next election. When it is fully implemented he will be golfing in Hawaii and LHAO
Feb 25, 2014 2:45PM
You will be paying more !  Period !  LMFAO
Feb 25, 2014 2:56PM
So the article explains that the only companies benefiting from the law are advertising companies (either ads against it or encouraging people to sign up), and IT companies that are processing the data.  The article leads you to believe the focus will be on whether the law is saving or costing businesses more, as was briefly discussed with Walmart.  Instead, the title should read:  What Companies are Profiting from the ACA?  In reality almost every other company out there is being hurt by the ACA, but the article does not touch on that.
Feb 25, 2014 3:11PM
I am just one individual and it is costing me over $3,000 more per year because I am paying for coverage I don't need and paying for other peoples coverage that didn't have it before.  I can't imagine what kind of full scale effect this is going to have if I am just one person.  The companies that are going to have to pay are going to get slammed!
Feb 25, 2014 3:04PM
When the ignorant starts receiving statements stating charges not covered under their plan, they will soon discover the fallacy of O-momma care. Just remember those premiums are cheap for a reason...............................YOU must pay that $10,000 deductible for insurance benefits.
Feb 25, 2014 3:27PM
Be smart when going to the polls this year!! Don't allow this administration to pull the wool over your eyes again. Vote every single senator and congressmen out of office who supported Obamacare! The worst is yet to happen if we don't!
Feb 25, 2014 2:58PM
20% unemployment on 01/01/2017. Anybody wanna book the over/under?
Feb 25, 2014 2:30PM
We need to do the same for retirements. Pensions are a thing of the past. Teach people how to manage money and save for retirement. Give them some tax breaks to do it. Get us back to where people did not have to risk their principle in the stock market, and could get 5% on a CD or money market account. This country has turned into a crap shoot.
Feb 25, 2014 3:16PM
We can never go back. Obama has fundamentally changed America just has he promised.
Feb 25, 2014 3:05PM

YEP! Sounds about right for the educated minds of TODAY? "Could be a boost, or drag on earnings"? REALLY! And how much did mom & dad spend to send you to school to get educated? I would say they got their moneys worth!

Is everybody NOW seeing clearly that it was NEVER about making healthcare "more affordable"? MEANING COST LESS! No it was all about putting more money WHERE THEY WANTED IT TO GO, and having someone else pay most of it for you for it for you. THE GOV'S DREAM! CONTROL EVERYTHING AND EVERYONE!

Mexico is knocking! Are you going to open the door? I LOVE THE USA!

Just as it be known this health care crap is illegal.  The government in no way can make people buy anything much less insurance.  Although insurance is required to drive a car or truck or really anything else.  It is illegal also.  The only reason for insurance is to protect you and your passengers, along with your vehicle which is over priced in the first place.  If you want the protection then buy it but it shouldn't be buy it and then you can drive.  That should be up to you if you want it or not.  Obama still doesn't get it about much in America as he is from Kenya.  Maybe insurance on your spear.
Feb 25, 2014 3:08PM
The devastation will grow steadily, not unlike a tidal wave, on this mistakes' way to it's second decade, ........... at that point the damage will be irreversible and as that 20 yr mark arrives, those likely to be paying upwards of 15% on many millions in estate taxes will be bailing at about 10,000 per year, taking with them the planned working capital to keep a strong democratic base comfortably unemployed for generations, OOOPS! 
Feb 25, 2014 2:27PM
Get basic healthcare off the backs of our companies and the gov. and only cover workmans comp and short term disability for getting hurt on the job.  The only people we should be supporting is our troops that get hurt in combat.  Let people buy a reasonable long term disability policy and let the companies give the workers dollars to buy the policies on the open market. Tax free for both the company and employees. We cannot afford all these legacy costs. Get it all back to the open market like it should be. We would not even be having the above discussions and cumbersome company expenses.
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