(Bloomberg) — U.S. hospital companies and health insurers face the highest corporate stakes when the Supreme Court hears arguments Wednesday to decide the fate of a major part of the Patient Protection and Affordable Care Act (PPACA) health insurance premium subsidy program.
Since the law’s 2010 signing, shares of HCA Holdings Inc. (NYSE:HCA), Tenet Healthcare Corp. (NYSE:THC) have more than doubled. The law has also benefited health insurers, with Anthem Inc. (NYSE:ANTM) and UnitedHealth Group Inc. (NYSE:UNH) trading near all-time highs.
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PPACA could provide about $22 billion in credits help people buy insurance this year, according to the Congressional Budget Office. So far, 11.4 million Americans have signed up for 2015 coverage, giving insurers and hospitals more paying customers and cutting the number who show up in the emergency room to get care without paying.
The case now before the Supreme Court, King vs. Burwell (Case Number 14-114), hinges on differences in the text in the provisions of PPACA that created the state-based exchange system and let the U.S. Department of Health and Human Services (HHS) provide exchange services in states in which the states were unable or unwilling to establish exchanges.
The Obama administration says PPACA lets the public health insurance exchange set up by HHS offer consumers premium tax credits. The tax credits help about 75 to 80 percent of exchange users pay for their coverage.
PPACA opponents say only exchanges established by states can offer the subsidies.
The justices may not issue a decision until late June.
See also: King vs. Burwell: Not the only PPACA court game around.
A ruling against the Obama administtration could raise insurance premiums for 7.5 million Americans, according to an estimate by Avalere Health, a consulting firm. Many would drop their insurance plans, and when they got sick, they’d still go to the hospital.
“You’re going back to charity care,” said Ana Gupte, a hospital and health insurance analyst at Leerink Partners.
Without insurance subsidies, Gupte estimates adjusted earnings growth across a group of hospitals would slow in 2016, to 4 percent from 7 percent. Since the Supreme Court agreed to hear the case on Nov. 7, Tenet has declined 8.1 percent as of Tuesday’s close, the most among 56 stocks in the Standard & Poor’s 500 Health Care Index.