Thursday’s ruling from the U.S. Supreme Court upheld the Affordable Care Act and gave the Obama Administration some upside in securing his legacy as the president who brought change in how health care is delivered and financed.
Health care insurers also expected to see an upside from the Affordable Care Act, particularly from an influx of new consumers required to purchase insurance. Today’s ruling may have changed those expectations.
The Court held that, under the Constitution’s Commerce Clause, consumers could not be forced to buy a product. Under the Taxation Clause, the penalty for not purchasing insurance is a tax, according to the Court. Revenues from this tax could help offset subsidies that are provided to low or middle income individuals to purchase health care insurance; individuals who may not qualify for Medicaid.
Initial reaction to the Court’s ruling by the health care plans industry was a sharp drop in stock prices. The Yahoo Index for Health Care Plans fell almost ten percent right after the Court’s announcement.
The midday slide in health care plan stocks was probably due to the threat of greater regulatory oversight of health insurance premium increases. Also, changes in coverage requirements, i.e., taking on consumers with pre-existing conditions, may have also contributed to the slide.
According to Yahoo! Finance, insurers seeing decreases in their share prices included WellPoint (-5.17%) and Aetna (-2.71%). Health insurance giant Unitedhealth saw a tepid increase of .54%.
Health care insurers that administer Medicaid programs say an increase in their share values. The Affordable Care Act with its expected expansion of Medicaid recipients is expected to bring these providers additional revenues. Top performers, according to Yahoo! Finance, included WellCare Health Plans (8.77%), AmeriGroup (4.9%); and Molina HealthCare (8.58%).
The benefits that will flow to the private insurance industry in terms of additional purchasers of health insurance and the potential of increased revenues have typically been overshadowed by assertions that the Administration intends a government takeover of the health care industry. Today’s rally for insurers, even with more intense pricing scrutiny over the horizon, should work to allay those fears. Investors apparently see these insurance companies as significant partners in Obamacare.