Health system and health insurer stocks took a beating on Monday, three days after a federal judge in Texas struck down the Affordable Care Act as unconstitutional.
The ruling throws into question the healthcare coverage for millions of Americans who have individual market policies or receive coverage under the federal law's Medicaid expansion. That increased coverage has been a boon to both hospitals and insurers.
Franklin, Tenn.-based hospital chain Community Health Systems saw its share value plummet nearly 14% as of Monday's stock market close. Dallas-based Tenet Healthcare Corp.'s shares had lost nearly 7% of their value by Monday's close. Nashville-based HCA Healthcare was down nearly 3% at close, while King of Prussia, Pa.-based Universal Health Services was down 2.2%.
Insurers also felt the pain. Molina Healthcare's share price dropped nearly 9% as of Monday's close. Shares of Anthem and UnitedHealth Group had shed 3.2% and 2.6% of their value, respectively, by that time. Centene's share price is down nearly 5%.
Humana managed to come out unscathed, with shares trading up by about 1%. WellCare Health Plans was also unaffected. Neither sell plans on the individual health insurance exchanges.
Analysts with Jefferies wrote that the Texas ruling likely won't have direct operational or earnings impacts on healthcare organizations until a final ruling is made by the U.S. Supreme Court, which if the high court takes it up, would likely not happen until 2021 at the earliest. In the meantime, however, investors could view providers as a riskier proposition going forward if patients who gained coverage under the ACA were to lose those benefits, the analysts wrote. Following the implementation of the ACA's major provisions, providers took on less bad-debt expense, the benefit of seeing fewer uninsured patients.
If the Supreme Court were to take up the case and agree that the entire law is unconstitutional, not-for-profit hospitals' credit ratings would likely suffer, especially those in Medicaid expansion states, according to Moody's Investors Service. That's because providers' bad debt and uncompensated-care expenses would climb back up.
Such a ruling would also cut into insurers' credit ratings, as the bulk of the net gain in insurance rolls has come from state Medicaid expansions. The ruling would also eliminate subsidies on health exchanges, which could make insurance unaffordable for the 8 million to 9 million people who currently receive subsidies, according to Moody's.