Column: Add healthcare investors to the list of victims of that Texas judge’s idiotic ruling against Obamacare

Democratic congressional leaders Rep. Nancy Pelosi of San Francisco, right, and Sen. Charles E. Schumer of New York leave the White House after a Dec. 11 meeting with President Trump. They say they'll seek to join the defense of Obamacare against a Texas federal judge's ruling.
(Andrew Harnik / Associated Press)

The potential victims of the widely ridiculed ruling by U.S. District Judge Reed O’Connor of Texas against the Affordable Care Act number in the millions — possibly about 160 million protected by one or another of the law’s medical-related provisions.

Legal experts say those people won’t necessarily feel the effect of the ruling for months, if not years — and that’s assuming it’s upheld by higher courts, which the experts consider unlikely. (Here’s a concise rundown of how off-kilter the ruling is, by Abbe Gluck of Yale Law School.)

But there’s a whole different class of people who already are feeling the impact. They’re investors in shares of healthcare companies dependent on the continued operation of the Affordable Care Act. Many of those stocks took major hits after trading opened Monday morning, followed by further declines Tuesday.


The worst blow seems to have been sustained by Molina Healthcare, a Long Beach health insurer that was already facing questions about its management, as we reported over the weekend. Molina shares closed Tuesday at $118.36 on Nasdaq, down $14.69 or 11.15% from its close Friday. (O’Connor issued his ruling after the market’s close Friday.)

That’s a reflection of the company’s heavy investment in two Affordable Care Act programs. Molina derived about 35% of its 4.5 million members and about 32% of its premiums from the ACA marketplace and Medicaid expansion in 2017, the company reported.

Also heavily affected were shares of Centene, a St. Louis-based insurer with a similarly sizable dependence on the ACA. Centene closed Tuesday at $120.09 on the Nasdaq, having sustained a two-day loss of $7.44 or 5.83%. Like Molina, Centene has focused on the lower-income end of the health insurance market, a strategy that has helped it find a profitable niche in the exchange and Medicaid expansion markets.

J.P. Morgan analyst Gary Taylor calculates that Centene and Molina both depend on the ACA programs for more than 40% of their earnings per share, according to Bloomberg.

Among other healthcare companies suffering trading losses that were probably due in part to the ruling are Anthem, down 5.89% over two days, and Cigna, down 6.48% in the same period.

On the broader market, stocks fell sharply Monday but recovered Tuesday. From Friday through Tuesday, the Standard & Poor’s 500 index fell 2.04%, the Nasdaq fell 1.83%, and the Dow Jones Industrial Average fell 1.76%.

What distinguishes these losses from those of other stakeholders in the ACA is that they’re immediate, though they may well be fleeting. O’Connor’s ruling, however, could have a long-term impact on millions of others by eliminating the ACA’s benefits and consumer protections.

Start with an estimated 133 million Americans with preexisting medical conditions who are protected by the ACA from being rejected or surcharged for health coverage.

Factor in some 20 million Americans who have obtained coverage for the first time, via either the ACA’s insurance exchanges or Medicaid expansion; an estimated 3.4 million seniors who hit the prescription coverage gap in Medicare known as the doughnut hole, which is narrowed by the ACA; and an estimated 2.3 million young adults who stayed on their parents’ health plans up to age 26, as permitted by an ACA provision.

Legal scholars across the political spectrum overwhelmingly expressed the opinion that O’Connor’s decision is unlikely to pass muster in higher courts. Under normal circumstances, it would be appealed to the U.S. 5th Circuit Court of Appeals in New Orleans, and could then be taken up by the Supreme Court.

The lawsuit that produced O’Connor’s ruling was brought by Texas and 19 other so-called red states. They argued that because Congress reduced to zero the ACA’s penalty for not having health insurance — known as the individual mandate — the rest of the law is unconstitutional. Congress eliminated the penalty in the tax cut bill enacted in December 2017. The action goes into effect on Jan. 1.

The Trump administration abandoned its defense of the law in O’Connor’s court in June, so the defense is being handled by a coalition of 16 blue states, led by California. Democratic leaders in Congress have said they will also seek to step into the case in 2019, when Democrats take control of the House of Representatives. But appeals could take months, or even more than a year.

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