Supporters of the Affordable Care Act celebrate as the opinion for health care is reported outside of the Supreme Court in Washington, June 25, 2015.
Al Drago | CQ Roll Call
Shares of health insurers and hospitals sold off sharply Monday, following the death of supreme court justice Ruth Bader Ginsburg and the looming battle to confirm her replacement. Analysts say it creates a new level of uncertainty over the future of the Affordable Care Act, also known as Obamacare.
“It sounds like the Republicans are really gonna push for a supreme court nominee approval before the new administration ( and) the fear is that the ACA will be probably repealed,” said Jefferies health care analyst Brian Tanquilut, adding “I’m not sure that’s necessarily the case, but obviously that’s the fear that’s been baked into the stocks right now.”
Hospital operator stocks also fell, with Tenet Healthcare sinking 13%, Universal Health Services down 8.6% and Community Health Systems off 6%. Investors worry that the repeal of the ACA could result in higher uncompensated care for the facilities, if millions were to lose health coverage.
The Supreme Court is set to hear the latest constitutional challenge to Obamacare, the case of California vs. Texas following the election on Nov. 10. If a new justice were to be seated in time for that case to be heard, that could push the balance of the court in favor of repeal.
“If the case gets argued in front of a new Supreme Court with a new justice, the center of gravity and the court will no longer be with Chief Justice Roberts, who has turned away too much stronger challenges to the law. It’ll be with the other conservative justices,” explained professor Nicholas Bagley, of the University of Michigan Law School, while adding he thinks the fears are overblown.
“The question is, will those conservative justices all vote to eliminate the Affordable Care Act, on the basis of this case… I think it’s not likely,” he said.
The current case before the high court centers on the issue of the individual mandate. Trump administration and Republican states argue that when Congress reduced the Obamacare individual mandate penalty to $0, the ACA was effectively invalidated. Chief Justice John Roberts cast the decided vote to uphold Obamacare in 2012, by ruling the individual mandate penalty was the equivalent of a tax.
“There’s a long way between getting a solid conservative majority and getting rid of the law entirely,” because of the consequences of repealing the law, said Douglas Holtz-Eakin, president of the bi-partisan American Action Forum, and former economic policy director for 2008 Republican presidential nominee John McCain. “They could end up landing in a bunch of different places, to avoid a complete disruption. We’ve seen them do that in the past.”
Capitol Street health policy analyst Ipsita Smolinski says beyond the case itself, the battle to seat a conservative justice before the election in November will likely rally President Trump’s anti-abortion evangelical voters.
“If he gets somebody through quickly, who is potentially pro-life, that can can rally that base” said Smolinski, while adding it could similarly motivate pro-choice voters. “It cuts both ways, but I think it honestly helps Trump more.”
JP Morgan analyst Gary Taylor downgraded hospital stocks Monday morning on greater uncertainty in the economy and the election. He argues the confirmation fight over Ginsburg’s replacement could favor Democratic nominee Joe Biden and pave the way for a Democratic sweep in November’s election.
“Ruth Bader Ginsburg’s unfortunate death may serve to particularly reinvigorate Democratic polling, campaign contributions & turnout. Thus, the election overhang on the sector from Joe Biden’s stated support for a ‘Public Health Insurance Option,’ lowering the Medicare eligibility age and removing the Senate filibuster will likely increase,” Taylor wrote in a note to clients.
The stakes will be high for both sides to make sure that there is something in place if the court strikes down the ACA, according to voters polled by the American Action Forum.
“The majority of Republicans and Democrats said don’t touch these programs, which is truly quite striking,” in this partisan environment said Holtz-Eakin.