What Obamacare Means for the Investment Markets

The Affordable Care Act (ACA) or Obamacare was signed into law in March of 2010. Most of the provisions of the Act are scheduled to go into effect January 1, 2014.The new law has been touted as the solution to increasing the quality and affordability of health insurance reducing health care costs and improving healthcare outcomes.

Whether you are a proponent of the new law, oppose it or really don’t understand what Obamacare is all about, the new law will have a direct impact on investment markets.  Here are some factors you will need to consider to successfully manage your investment portfolio, including alternative investments under Obamacare.

Obamacare and jobs

The U.S. has been grappling with sluggish job growth and an unemployment rate that has been stuck above 7 percent. According to the Q2 Small Business Survey conducted by the U.S. Chambers of Commerce, the ACA rates Obamacare as the top concern among small business owners. They believe that ACA will make it harder to grow their businesses and create new jobs.

The U.S. Small Business Administration consistently cite studies that show that more than 50 percent of the nation’s workforce work for  small .-thirds of the new jobs over the last 15 years come from small firms. Fifty percent of the respondents in the survey said they will cut hours and hire part-time workers to escape the requirements of the mandate.

Supporters of the new law believe the anxiety is unwarranted because it only applies to companies with 50 or more employees, which eliminates 95 percent of small enterprises. With a weak U.S. economy, market watchers will closely monitor the law as it is implemented and its influence on investors’ behavior and the markets.

More competition for tax exempt and tax deferred investments

Many investors will need to reevaluate their investment portfolio—including making sure they are investing as efficiently as possible. Obamacare will create more competition among Investors searching for yields and tax advantages with tax deferred or tax exempt instruments, such as muni bonds, master limited partnerships, US-I Bonds or other alternative investments.

Higher taxes on investment income

Right off the bat, higher earners are hit with an additional 3.8 percent tax on investment income. You must calculate the tax on the lesser of investment income or the amount that the modified adjusted gross income exceeds $200,000, $250,000 for a married couple, filing jointly or $125, 000  for married, filing separately.

The new tax is based on how much money you make after adjusting your income for state tax obligations and additional deductions. Although the tax does not apply to retirement accounts, it attaches to rental properties and brokerage accounts.

Investments in the healthcare sector

The ACA requires all individuals to have some form of health insurance by January 1, 2014—coverage by an employer, sign-up for public programs like Medicaid or Medicare or buy an individual policy.

Projections are that the law will create 50 million health care consumers. Some markets that will undoubtedly benefit from the law include:

• Health care  providers
• Drug manufacturers
• Medical equipment and device firms
• Pharmacies

The Individual Mandate of the law which requires every adult and child to have health insurance by 2014. Coverage can be supplied through your job, public programs such as Medicare or Medicaid, or an individual policy that you purchase. Companies that help small business obtain health care, increase demand for cutting-edge innovation, equipment, techniques and procedures, as well as an overall increase in demand for medical services.

What do you think is next in the investment world now that Obamacare is rolling out?  Leave a comment below.

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