Companies Cite Obamacare Costs

May 14, 2014

Since the first of March, 30 companies in the Standard and Poor's 500 have mentioned Obamacare during their conference calls, according to John Butters, analyst at FactSet, a financial data research firm. Half of those companies, reports USA Today, are businesses within the health care industry.

Discussion of the law has not been positive, as companies have been hit with new costs and obligations. While some have merely cited increases in insurance costs, other companies say that the law is impacting consumer demand for their products:

  • General Electric (GE) reports that its healthcare unit did not perform strongly due to the Affordable Care Act, as hospitals and clinics delayed equipment purchases. Analysts expected $34.4 billion revenue for GE in the first quarter, and the company reported revenue of $34.2 billion.
  • According to UPS, the company is transferring its employees to a defined contribution health care plan in order to deal with rising insurance costs. The company's quarterly profit was 9 percent short of Wall Street forecasts.
  • Dollar General says that its overhead costs are increasing thanks to the Affordable Care Act, causing a loss in earnings of 2 to 3 cents per share.
  • Technology company Cognizant reported its slowest revenue growth in years, citing Obamacare. However, its quarterly profit exceeded expectations by 5 percent.

On the other hand, Paychex, a payroll service provider, says that the Affordable Care Act created new opportunities for the company, expecting that small businesses will hire it in order to manage the requirements of the new law.

According to Nicholas Heymann, analyst at William Blair, more companies will cite Obamacare costs in future reports. Health insurance costs will continue to rise, and manufacturers will see a drop in demand for medical devices because of uncertainty surrounding the deductibility of investments.

Source: Matt Krantz, "Companies: Obamacare is hurting our profit!" USA Today, May 8, 2014.

 

 

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