By Jon Kamp
Thursday's historic Supreme Court ruling upholding the U.S.
health-care overhaul law sent stocks throughout the health-care
sector in different directions by maintaining the promise of more
people seeking services, but also new costs and other big
changes.
By upholding the politically contentious law, the high court
keeps alive this complex mix of opportunities and pressure points,
at least through November's elections. The law aims to extend
coverage to tens of millions of Americans through state-based
exchanges and a broader Medicaid program while imposing various
cuts and taxes on health companies.
Hospital operators broadly posted big gains because the upheld
law promises coverage for millions of Americans who might otherwise
seek care and stick hospitals with unpaid bills. Big managed-care
firms--which are slated to get new customers from the law but also
face earnings-compressing coverage requirements--traded lower.
Overall, the NYSE Healthcare Index recently traded down about
1%, matching broader-market declines amid widely divergent moves
throughout the health-care sector.
Hospitals helped lead the charge higher, with HCA Holdings Inc.
(HCA), the biggest investor-owned hospital company, jumping 7.8% in
recent trading. Community Health Systems Inc. (CYH) rose 10.9% and
Tenet Healthcare Corp. (THC) rose 7.6%.
Hospitals are the "net winners" here, having won a
best-case-scenario outcome, according to Goldman Sachs.
Among big health insurers, UnitedHealth Group Inc. (UNH) fell
3.3%, Aetna Inc. (AET) sank 4.5% and WellPoint Inc. (WLP) declined
6.3%. Thursday's ruling keeps in place a law poised to add
customers but also pressure earnings through new requirements, such
as taking on people regardless of their health history and not
charging more for pre-existing conditions.
Predictions ahead of the ruling were all over the map, although
expectations the law would be totally upheld declined significantly
after oral arguments before the court in March.
"Modest declines in the shares of commercial insurers suggest at
least some investors expected the law to be struck down," Wells
Fargo analyst Peter Costa said.
According to Goldman Sachs analysis, earnings for big insurers
would have been highest over the next four years if the law was
struck down. Thursday's ruling was more of a middle-ground outcome
for insurers amid investor hopes for more.
Meantime, shares of Medicaid-focused insurers jumped on
expectations that the health plan for the poor will expand to add
millions more people, with WellCare Health Plans Inc. (WCG) up
8.9%, Amerigroup Corp. (AGP) up 4.3% and Molina Healthcare Inc.
(MOH) up 4.1%.
The high court said the federal government can't put sanctions
on states' existing Medicaid funding if the states decline to go
along with the expansion, but can withhold new funds if the states
don't comply with the requirements.
Shares were down in the medical-device sector, where the law
means companies are set to start paying an excise tax on domestic
sales next year. Medtronic Inc. (MDT), which has estimated a $120
million to $150 million annual impact, slid 1.2%. Spinal-device
maker NuVasive Inc. (NUVA) declined 2.1%.
Write to Jon Kamp at jon.kamp@dowjones.com