Supreme Court Ruling Won’t End Questions For Health Insurers


 

Dow Jones Newswires

Investors hoping the pending Supreme Court decision on the U.S. health-care law will clear an uncertain outlook for managed-care firms may wind up disappointed.

Confusion among investors stems from different ways the high court could rule–possibly rejecting some, none or all of the law–and how industry, politicians and voters will respond. The elections later this year could lead to yet more health-care changes, creating more uncertainty as the court debate fades.

Take it to the bank that the Marxist Chubster will leak the outcome of the decision before it is officially announced.  Why else would she not have recused herself?

After the court’s decision, expected some time this month, there will probably be “as many questions as answers,” according to Moody’s Investor Services.

Investors still seem hopeful the ruling will bring at least some clarity, if not benefits, for insurers. Shares of the five biggest publicly traded health insurers rose an average 9% during a late-March week when the Supreme Court held oral arguments on the health law, fueled by hopes of avoiding an unfriendly decision. Insurer stocks also climbed after an unfounded late-May market rumor that a ruling was about to be released.

A central question for the court is whether the federal government can require Americans to get health insurance, or pay a penalty. If this mandate is struck down, the next big question is whether the rest of the law can still stand. The court is also set to rule on a planned expansion of the Medicaid program for the poor, which is important for Medicaid-focused insurers like Amerigroup Corp. (AGP), Centene Corp. (CNC) and Molina Healthcare Inc. (MOH).

The worst-case scenario for the big insurers like Aetna Inc. (AET) and WellPoint Inc. (WLP) is that the Supreme Court would strike down just the individual mandate. This would deprive insurers of new, potentially healthy customers who could help offset the law’s key coverage requirements, such as accepting applicants with pre-existing conditions and not charging higher premiums based on medical history.

While this doesn’t look like the most-expected outcome, some analysts have warned against ruling it out. Raymond James sees big insurers shares falling up to 10% under this scenario.

Opinions are mixed on how stocks might react if the profit-hurting coverage requirements are also tossed along with the mandate, which would mean different things for different companies. Keeping the law totally intact is expected to lift insurers’ stocks somewhat, and shares could jump well above 10% if the whole law is struck down, analysts estimate.

Insurers have argued that getting rid of just the mandate would cause premiums to soar because people could wait to buy coverage only when they are sick. Still, some insurance executives have played down the ruling’s importance, arguing that because the mandate lacks sharp enough penalties to work effectively, the law needs fixes anyway.

Aetna Chief Executive Mark Bertolini recently said the court ruling will be “much less material than all of you think it is.” If the court strikes down the mandate and the other coverage requirements, this would just “accelerate the conversation” about fixing the law in regulation, Mr. Bertolini said, speaking at a bank-hosted health conference.

Meanwhile, if the court leaves any part of the law intact, Moody’s noted that a Republican presidential victory this fall “could change everything.” Even if there aren’t enough votes in Congress to repeal the law outright, Republican presidential candidate Mitt Romney, if elected, would get to appoint a health secretary would could prevent parts of the law from going into effect.

Amid the uncertainty, companies have acknowledged some changes are here to stay. For example, Aetna, UnitedHealth Group Inc. (UNH) and Humana Inc. (HUM) are saying they’ll keep certain consumer-friendly benefits already required by the law–such as keeping young people on their parents’ insurance until age 26–regardless of the court ruling.

Also, pressure to change a costly and complicated health system won’t go away either. Though it seems hard to imagine lawmakers will have much appetite for more health-care debate, should the whole law get struck down, the status quo has well-recognized problems.

“The underlying currents that have driven that legislation will still be there,” said Stephen Hemsley, chief executive of UnitedHealth, the largest insurer by revenue and membership, at the recent bank conference. “The need for coverage, the need to deal with costs, the need to make the health-care system more effective and use those resources more effectively, those things will still be there.”

 

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2 responses to “Supreme Court Ruling Won’t End Questions For Health Insurers

  1. I hope it is declared unconstitutional – but that still leaves some major problems. The entire bill needs to be repealed not some parts taken and some not. The entire bill is horrid and the costs alone will bankrupt many millions of people. We will have no money to live on – so why bother – no matter what we are screwed. Romney likes it and will keep some of it – that is the wrong approach and he will be crusified for doing this.

  2. In the meantime, the Senate Judiciary Committee need to PULL this socialist commie b—- OFF the bench, impeach her now- -she NEVER should have been confirmed!

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