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Some retailers are issuing warnings that the Affordable Care Act could weigh on their profits.
Starting in January, most of us will either need to have health insurance, or pay a penalty. In a call with analysts last week a Walmart executive said that’s another “line item in their personal budget” that could cut into customers’ spending, according to the Wall Street Journal.
“We haven’t seen any impact, but we’re keeping an eye on it,” Walmart spokesperson Randy Hargrove told Marketplace.
“Obviously there’s only so many discretionary dollars, and if there’s fewer, consumers are going to have to make harder choices,” says Lynn Franco, an economist with the Conference Board.
This story has come to be known as the “Dog Ate My Homework” kind of story around Marketplace. Another tale of retailers blaming the latest weather pattern, blackout, Congressional gridlock — the list goes on — for their earnings woes.
“Yes, it’s probably going to be the excuse du jour, but yes, it is a true cost, and people are going to have to absorb it,” says analyst Scott Mushkin with Wolfe Research.
But isn’t the Affordable Care Act supposed to save people money?
A recent study by the Rand Corporation predicted out-of-pocket medical expenses will decline for most people who are newly insured or change their health plans. Then there are the almost nine million more people who will be covered by Medicaid, says Josh Bivens with the liberal Economic Policy Institute. Others will get subsidies to buy insurance.
“In my mind this is kind of like a delayed, small stimulus program, because it’s actually providing people who are otherwise cash-constrained to give them more income in the next couple years,” Bivens says.
Other economists say it’s too soon to know how the health care law will play out.
“I really don’t think we have enough information yet to have a sense of whether this is a real problem or something that will prove not to be a major issue,” says economist Scott Hoyt with Moody’s Analytics.
Analyst Joe Feldman, who follows Walmart for Telsey Advisory Group, says that uncertainty itself can weigh on shoppers.
“If it’s in the consumer’s mind that they may have some pressure down the road, you may see them pull back on their spending,” says Feldman.
As more retailers come out with their earnings forecasts in the next couple weeks, Feldman says we can expect to hear more about that pressure.
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