NEW YORK (TheStreet) -- Do you like the heath care sector as an investment theme in 2013 and beyond?Even if you're ambivalent about Obamacare or totally opposed to it, some version will become law in 2014. Love it or hate it, it has the potential to boost health insurance stocks in a big way going forward. Even though the government is in shutdown mode as I write, on Oct. 1 the government-subsidized health insurance exchanges and state insurance exchanges were scheduled to come online. Little is known yet concerning how many uninsured Americans will pay a large percentage of their disposable income to buy health insurance through the insurance supermarkets called "exchanges." According to one survey sponsored by Citigroup ( C), the number of people who may initially sign up could be as high as four million. Time will tell. What we do know is that there's an overlooked form of insurance that's been going on for years. It's called Medicaid, and it's a government-sponsored health plan for the economically challenged. More than 29 million Americans have their Medicaid benefits managed by private insurers. Medicaid is in the midst of its biggest growth spurt since it was created back in the 1960s. It provides a huge amount of revenue for insurance companies that specialize in Medicaid and also in Medicare. Two of the major players in this lucrative business arena are Molina Healthcare ( MOH) and WellCare Health Plans ( WCG). Molina manages Medicaid coverage in several states, including California, Florida and Illinois. Medicaid is the state and federally funded program that provides health coverage for the poor and disabled people in most states. Molina is a shareholder-friendly company as well. On Oct.3 the company announcedits board has approved a plan to buy back up to $50 million of the company's stock. The Long Beach, Calif., company's repurchase became effective Sept. 30 and extends through the end of the year. It will be funded by existing cash. This acts like a no-tax, stealth dividend for shareholders because stock buy backs tend to make the outstanding shares dearer and gooses the price higher. Unlike a regular dividend, it's a tax-free benefit.
WellCare is expected to finish 2013 with a similar annual EPS than it achieved last year. Revenue is expected to be up 26% from the previous year. WCG has a clean balance sheet with total cash per share as of the quarter ending June 30 of $34.59. It appears that the promising prospects for Medicaid and Medicare insurers are already reflected at current price levels. Molina has had a great run with its share price up over 120% in the past 24 months. WellCare has done slightly less than half that well with about a 64% two-year price increase. If the funding and demand for Medicaid increases in the year ahead there are reasons to anticipate more share price growth, especially if one or both companies declare a sustainable dividend. WCG has a market cap of less than $3.2 billion. MOH is slightly more than half that size weighing in with a market cap of only $1.68 billion. Both these profitable companies may be takeover targets, but MOH seems particularly affordable to a big acquirer who see a synergistic fit. If you plan to invest in both these collateral beneficiaries of Obamacare, consider scaling in gradually, buying a third or even half of a position size at a time. You might consider buying these two plus the third big name in this subsector, Centene ( CNC). Analysts anticipate CNC to experience a 27% jump in EPS next year over this year. The St. Louis company hit a 52-week high on Friday Oct.4th and trades too rich for my appetite at a current PE of 48 and a forward (one-year) PE ratio of almost 19 times earnings. I'd want to see it correct before I'd nibble on CNC, but MOH and WCG are ripe for scaling into and if shares drop, celebrate and buy some more. Ready or not, here comes Obamacare, so investors might as well reap the benefits and the companies that will be as well. At the time of publication the author had no position in any of the stocks mentioned. Follow @m8a2r1 This article was written by an independent contributor, separate from TheStreet's regular news coverage.