By The Associated Press
Health care investors are awaiting the Supreme Court's decision on the health care overhaul that likely will affect income statements in the long term and stock prices at least in the short term.
The court is expected to issue a ruling sometime after 10 a.m. Eastern on the massive law that aims to extend insurance coverage to millions of uninsured people starting mainly in 2014. One of the key issues the court may decide is whether the government can require people to buy health insurance under a so-called individual mandate.
The law requires health insurers to cover all who apply for insurance starting in 2014, which means they won't be able to deny coverage to someone with a pre-existing condition like diabetes. Insurers have argued that in order to do this, the law must include the mandate, which gives them healthy people to balance the customers who produce more in claims than they pay in premiums.
Some analysts see as several possible rulings coming from the court. These include striking down the individual mandate but leaving the rest of the law, striking down the entire law or upholding it.
Compounding potential investor confusion, each possibility will affect health care sectors in different ways. In fact, the decision also will affect companies inside each sector differently.
For instance, hospitals will benefit if the law is upheld because an expansion of the state-federal Medicaid program means they might treat fewer uninsured people. But health insurers, drugmakers and medical device companies will still be on the hook for billions of dollars in taxes and fees that help pay for the coverage expansion. However, the law also helps mitigate this by providing new customers.
If the court strikes down the law, those industries will be relieved of the hefty payments, but a shadow will still hang over their stocks. Health care expenses are still taking growing bites out of the economy, and more than 50 million people remain uninsured in the country.
This means health care stocks will likely be subject to another attempt at reform.
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