Wednesday, January 17, 2018
Business

Insurers, hospitals brace for health care ruling and stock fallout

NEW YORK — If the Supreme Court throws out President Barack Obama's health care overhaul this month, companies would rejoice, right?

Well, not all of them.

For many companies, overturning the law could mean less profit, not more. Certain health care insurers and hospitals could no longer expect to get payments from millions of newly insured patients.

What's more, health care experts say many big companies want to see the law upheld because they've worked hard to adapt to it and fear legislation replacing it might prove more costly to them.

"There's no guarantee that Washington wouldn't come up with something more disruptive," said Matthew Coffina, a health care analyst at Morningstar, a research firm. "You have to worry about what comes next."

The Supreme Court is expected to rule on the law, called the Affordable Care Act, by the end of the month. The justices will decide whether Congress went beyond its authority in the Constitution in passing it. They could throw out all of the convoluted law, part of it or decide to keep it intact.

Opponents have focused on the so-called individual mandate. This requires virtually every U.S. resident to carry health insurance. Most of the estimated 50 million currently uninsured will be able to obtain taxpayer-subsidized coverage, either through an expansion of Medicaid eligibility or new markets for private insurance called exchanges. Some people are exempt from the mandate, such as illegal immigrants.

If the court throws out the individual mandate but keeps the rest of the law, hospitals would have to foot at least some of the bill when uninsured patients show up for treatment. Though it's not clear investors are anticipating this, they have been selling stock of hospital chains lately. Since the high court started considering the case in late March, they have pushed down the stock of Universal Health Services, Tenet Healthcare and Kindred Healthcare by 6 percent or more.

Some insurers could get hit, too. In a partial repeal, the law would still require insurers to offer policies to people with prior medical conditions such as diabetes and cancer. That raises the scary prospect of only costly, sick people signing up for coverage. Healthy people who would otherwise help pay for sick people's bills with their premium payments might choose to stay uninsured. After all, they could always sign up for coverage once they got ill.

If the Supreme Court repeals the individual mandate and the new coverage rules, insurers wouldn't have to worry about people signing up for coverage only after they got sick. They could just reject them. And the tax credit and Medicaid expansion would remain. Experts expect many uninsured would take advantage of those incentives to get coverage, and insurers would make more money.

Just how much of a benefit insurers would see under this scenario is difficult to know. Many insurers do the bulk of their business with employers, with individual policies accounting for a tiny share. At Wellpoint, one of the biggest providers of individual insurance, policyholders getting such coverage make up less than 5 percent of the total.

If the court repeals the entire law, insurers focused on Medicaid recipients could lose. Of the estimated 30 million people gaining coverage under the law, more than half are expected to benefit from the expansion of eligibility requirements for Medicaid, the federal-state program for low-income families. Take away the law, and you take away those new customers.

But it's unclear how much insurance stocks would fall, if at all. Morningstar's Coffina says he doesn't think Medicaid will pay as much in premiums for the new recipients as they do for the elderly, blind or disabled already in the program. And so he questions whether insurers specializing in Medicaid will lose much if the law is repealed.

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