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Troy

High court arguments on reform will test share prices, experts say


By Beth Kutscher
Posted: March 14, 2012 - 6:45 pm ET
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Hospital share prices will be tested as the Supreme Court hears arguments on the Patient Protection and Affordable Care Act, health policy experts said at a Nashville Health Care Council panel discussion.

Oral arguments on the healthcare reform law will begin on March 26 and are scheduled for a monumental six hours over three days.

The court is hearing several distinct arguments—including whether states are being coerced into expanding their Medicaid programs, whether individuals can be required to purchase health insurance and whether that insurance mandate is severable from the law itself.

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“If the expansion is struck, I think that would be a far greater surprise to the market than if the mandate is struck,” said Paul Heldman, senior health policy analyst at the Potomac Research Group.

But even if it's just the mandate that's struck down, hospital shares will be under continued pressure because of concerns about volume, he noted. Conversely, if the entire law is struck down, hospitals may see shares rally—at least initially. “I think it would be a short-lived rally,” he said, adding that some of the uncertainty has been baked into share prices already.

If upheld, the law would add 30 million newly insured lives in 2014, he added.

Lyle Denniston, a reporter who has been covering the Supreme Court for 54 years, also highlighted the individual insurance mandate as the most significant component for the industry. “That's the source of a sufficient number of customers for them to be able to afford the expanded coverage without raising premiums. The health industry has a lot riding on this.”

For its part, Blue Cross and Blue Shield of Tennessee has set up a healthcare reform office to prepare for the law's full implementation, including the health insurance exchanges that would go into effect in 2014.

“A lot of people think the insurance companies are against the Affordable Care Act—that's not necessarily true, at least not at Blue Cross Blue Shield of Tennessee,” said Tony Hullender, senior vice president and general counsel. He too noted that without an individual mandate, insurance companies may exit the market and prices may increase. “We think the individual mandate is the most important one.”

Denniston, who writes the SCOTUS Blog for Bloomberg, predicted that the justices will issue an opinion sometime in the last week of June—though they could potentially “kick the can” on a decision until after the election.

Tevi Troy, senior fellow at the Hudson Institute and former deputy secretary at HHS, noted that—no matter what the court decides—there will be political fallout on the Hill after the November elections. “I suggest that businesses prepare for uncertainty,” he said.


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