NEW YORK (AP) — Insurers and other health care companies are facing costly new restrictions and fees under the new law. The Republicans, the party most associated with big business, hate it. So if President Obama’s health care overhaul is repealed by the Supreme Court this month, companies would rejoice, right?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,” says 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, illegal immigrants, for example.
Here is how some companies will win or lose under four possible rulings by the high court.
The Court throws out the individual mandate but keeps the rest of the law
Hospitals could find themselves in the sick ward.
Hospitals have to foot at least some of the bill when uninsured patients show up for treatment. The law would help put an end to that by requiring most people to get coverage. Cut the requirement, and hospitals would have to continue paying out of pocket. Plus they would still have to swallow Medicare cuts in the law.
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. The Standard & Poor’s 500 fell 3.6 percent in the same period.
But investors should be careful not to overreact. If the high court rejects the individual mandate, hospitals would still be better off than if there were no law. The tax credit to help pay for insurance and the expansion of Medicaid might remain. That would make it easier for millions of uninsured people to get coverage, meaning fewer non-paying patients.
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.
This is why the Obama administration has asked the court to get rid of the coverage guarantee if the mandate is thrown out.
But, again, investors shouldn’t overreact. Insurers could limit losses under this scenario by dropping out of the business of directly selling coverage to individuals and sticking with just employer-sponsored plans. Or they could decide to stay in the individual market and recoup the cost of covering their new, sick customers by raising premiums. Studies suggest premiums in the individual market could jump by 10 percent to 30 percent.
The Court repeals the individual mandate and the new coverage rules
Insurers would win.
They 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.