Obamacare 2.0: What investors are watching

Obamacare 2.0: What you need to know
Obamacare 2.0: What you need to know   

Starting Saturday, millions of Americans will begin to either re-enroll, or sign-up for the first time, for insurance plans at HealthCare.gov. Both Health and Human Services Secretary Sylvia Mathews Burwell and the insurance companies participating in the program say they are ready for a fresh start.

"We have done the testing. We have put in place all of the contingency plans," Burwell told reporters at an enrollment event in Columbus, Ohio, this week. "We have tested everything…end to end."

Read MoreObamacare 2.0 starts Saturday

The start of last year's open enrollment was a disaster for the Obama administration. The federal marketplace, which serves as the insurance web portal for 36 states that opted not to build their own sites, was riddled with technical problems for the first two months.

It took a massive fix to get the website functioning properly, but it worked. By the end of the enrollment period, 8 million Americans signed up for Affordable Care Act plans.

HealthCare.gov website seen on Nov. 12, 2014.
Adam Jeffery | CNBC
HealthCare.gov website seen on Nov. 12, 2014.

Among the fixes for this year's enrollment, the online application for new enrollees is shorter, and will be available for the first time on mobile, and the HealthCare.gov small business portal is launching is now up and running for online enrollment after a one-year delay. Officials also upgraded the ability to window shop on the site, allowing users to browse plans before beginning the application process.

This time it (could be) different

While the government has beefed up its website, insurers have ramped up their offerings on the exchanges this year. The nation's largest insurer, UnitedHealthcare will be selling plans in nearly two dozen states this year, up from just five a year ago.

Read MoreObamacare sign-ups seen 30% lower than forecast

"Certainly from everything we've heard from HHS, the expectation is this is going to be a much simpler experience for consumers," said Jeffrey Lucht, UnitedHealthcare senior vice president overseeing the company's health exchange strategy.

"Regardless of what happenswe certainly can't speculate about the HHS website and what the functionality will bewe're prepared to help consumers get educated on their choices and also the enrollment coverage if they want to call us and talk to us directly," Lucht said.

For investors, there's more confidence the insurance industry can make money on exchange plans. The concern on Wall Street was that enrollees would be older and sicker, driving up health care costs and pressuring profit margins.

Leerink Partners health-care analyst Ana Gupte said the early earnings reports from Obamacare plan providers have helped allay those fears.

"We've gotten to the point where companies like WellPoint, HealthNet, and even Aetna are signaling that this could be and is a profitable business," she said.

New uncertainty: The Supreme Court

But for all the progress, there is one potential threat—a legal challenge at the Supreme Court, in the form of a case named King v. Burwell. Investors are watching it closely to see how it may affect the future of the health care program.

The case challenges the legality of the government providing insurance subsidies in states on the federal health exchange. The plaintiffs argue that the ACA wording only allows for subsidies to be paid on state-run exchanges.

While the High Court won't hear arguments until next yearwith a decision not expected in June or Julya ruling against the administration could disrupt the exchange marketplace. The new Congress, under a republican majority, is not likely to legislate a fix.

"Had we not had such a favorable material win in congress, as well as the gubernatorial elections," Gupte explained, "I think it might have been more easy to implement the workarounds that are being discussed."

Gupte said the impact is likely to weigh on hospital stocks more than on insurers, because hospitals have seen a big Obamacare bump already. With more patients covered by insurance, health-care systems have seen an increase in patient volume, and some reduction in uncompensated care.

Read MoreThe Obamacare exchange that's already failed

"They are also disproportionately skewed as far their footprint to the federally facilitated marketplaces," Gupte observed. "So, the downside risk in 2016 would be material."

Susquehanna analyst Chris Rigg said hospitals could still see strong volumes if more states choose to adopt expand Obamacare Medicaid eligibility. But he sees the King v. Burwell case weighing on hospital stocks over the next six months.

"In the event King prevails, we believe there are compelling arguments both for and against additional states facilitating their own health insurance exchanges," Chris Rigg wrote in a recent note to clients. "However, we think rationalizing potential political outcomes is imprudent given that today's political environment is inherently irrational."

The numbers

Near-term, analysts say the focus will be on the new Obamacare enrollment numbers. Already, the administration has tempered growth expectations, saying they expect to see 10 million total enrollment by end of this year's open enrollment period. That's significantly lower than the Congressional Budget Office's projection for 13 million enrolled in the second year of ACA.

Last year, even with problems the administration managed to exceed estimates. But last year, open enrollment ran for six months, through tax return season.

This year, it's shorterjust four months—ending on Feb. 15.