The Supreme Court’s decision on healthcare has been a highly anticipated announcement for nearly every American. The tension has broken and, as we all know, Obama-Care chalked up a big victory with the majority of the reforms being upheld. The repercussions of the decision were obvious, allowing the government to penalize, by tax, Americans who choose not to get health insurance. That mandate was the staple behind the implementation of healthcare reform as a whole.
A lot of speculation has been placed on the effect of the ruling, from the healthcare of individuals to the taxing changes, and even the possible repeal after the 2012 elections, but what has been left out of the discussion is the effect that the decision has had for investors. The financial distribution in the healthcare industry has found itself with a new layout and investors are wise to take notice of the changes.
The five to four decision has been noticed in the market in terms of the long term effects that the mandate and reforms will have on different aspects of the medical industry. In some parts, stock prices jumped, while in others, it dropped, and investors have an explanation for each.
The decision caused a drop in the stocks of medical devices because of the tax riding on them. This tax is enough to cause investors to find a new home for their money. As could have been expected, the stocks of the insurance companies took a hit as well, but the decision made by the courts wasn’t completely black and white. A ruling to repeal the individual mandate to buy insurance while not allowing insurers to refuse those with pre-existing conditions would have been an even big hit to the insurance sector. The repeal of the Medicaid portion of the healthcare reform caused the shares of those Medicaid providers to rise, assuming they would see a rise in customers.
Hospital stocks, on the other hand, hit a sharp rise. This movement was the result of a few different things. First, the individual mandate requiring health insurance will save the hospitals from providing free care to those who cannot afford it. That will save them a lot of money and is expected to make investors a lot as well. Also, with more people having insurance, they will be less hesitant to go to the hospital for treatment. As morbid as it may seem, a hospital is, at its basic form, as business and, as with any business, the more paying customers you have coming through your doors, the better.
The biggest effect on investors from the Supreme Court’s decision: certainty. Despite all of the forecasting and planning, many investors were still somewhat hanging in the balance trying to determine what would happen following the decision. Even though they have been hit with a slew of changes, at least now they can move forward knowing what’s in front of them.
Along with that certainty comes the question of whether the landscape will change again following the 2012 election. Mitt Romney has vowed that, if elected in November, he would work to repeal Obama-Care, almost in its entirety. If Obama is to win a second term, it’s safe to assume he will work to solidify the laws and reforms in his trademark healthcare plan.
So overall, where does that leave us? For now, hospital and Medicaid stocks are up. Insurance and medical device stocks are down. Investors can walk on a firm ground they have been waiting for since the beginning of the Supreme Court case, but that ground will get shaky again as November approaches. Of course, any changes at this point wouldn’t just show in the stock market, but also on your taxes and with your insurance costs. At this point, it’s wise to just hold on to your hats, and plan for your inability to plan.
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Gregory Ricks and Associates 