Ruling striking down ACA won’t affect coverage – yet

(Bloomberg) -- If you like your Obamacare health plan, you can keep it — at least for now.

A federal judge’s ruling that the Affordable Care Act is unconstitutional was a Friday-evening bombshell and a first-round victory for opponents of the law. But it will need to survive review by higher courts to have any effect on the program that’s credited with expanding health insurance to about 19 million people in the U.S.

A crimson banner appeared on the federally run healthcare.gov website over the weekend to reassure potential customers: “Court’s decision does not affect 2019 enrollment or coverage.” People had through Dec. 15 to sign up for coverage for next year in 39 states, and longer in some states like New York and California.

The White House confirmed that the law remains in effect pending appeal, even as President Donald Trump called the ruling “great news” and suggested Congress start working on a replacement. The ruling has “no impact to current coverage or coverage in a 2019 plan,” Seema Verma, the administrator for the Centers for Medicare and Medicaid Services, tweeted.

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An examination room is seen at the Oscar Center in the Brooklyn borough of New York, U.S., on Wednesday, Dec. 7, 2016. The Oscar Center runs in partnership with Mount Sinai Health Systems providing primary care services and health and wellness programs. Photographer: Kholood Eid/Bloomberg

Pressure will now be on Republicans, who’ve decried the ACA for years, to offer alternatives that won’t shut out sick people, as insurance markets routinely did before Obamacare. House Democratic leader Nancy Pelosi, a California Democrat, said the ruling “exposes the monstrous endgame of Republicans’ all-out assault” on access to affordable healthcare.

Verma last month said she had “contingency plans” to protect people with pre-existing conditions, without offering details.

If the law were thrown out, it would likely harm the businesses of hospitals, some insurers and healthcare providers who’ve gained millions of new paying customers thanks to the billions of dollars worth of subsidized health insurance coverage provided by the program.

U.S. hospital stocks are most at risk from the latest ruling and could fall materially as “market skittishness” results in “exaggerated moves” this week, according to Jefferies healthcare strategist Jared Holz. Health insurers could also drop, but some of that may be priced in because they fell ahead of the ruling, he said.

Centene and Molina Healthcare could bear the brunt of the selloff in managed care given their exposure to Medicaid and Obamacare markets, also known as the public exchanges. Both insurers have a total ACA exposure of more than 40% of earnings per share, followed by WellCare Health Plans at 10%, JPMorgan analyst Gary Taylor wrote to investors in an email late Friday.

Shares of the hospital operator Tenet Healthcare were down 5.8% in early trading in New York. Community Health Systems, another hospital chain, fell 3.6% and HCA Healthcare dropped 1.4%. Centene shares were down 5.9%, while Molina fell 5.9%.

Overturned, in theory

Spencer Perlman, an analyst with Veda Partners, called an ultimate ruling striking down the law unlikely. If it did happen, however, “this outcome almost certainly would increase the number of the uninsured, which clearly is a headwind for providers,” Perlman said in a note to clients. The opinion of federal Judge Reed O’Connor would be a shock to the healthcare system, if it ever takes force. The ruling is written so that it won’t take effect immediately, giving higher courts time to consider the case.

The Fort Worth, Texas-based judge agreed with a coalition of Republican-led states that challenged the law in federal court, after Congress repealed the tax penalty for people who don’t buy insurance. The legitimacy of that fee was part of the Supreme Court’s justification for upholding the law in a previous challenge.

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O’Connor’s opinion that the entire ACA can no longer stand would disrupt health-insurance markets and countless other aspects of American healthcare: expanded Medicaid coverage, rules for employer health plans, and a long list of taxes and changes to Medicare payments, among other policies.

That view is an even more expansive dismissal of the law than the Trump administration’s own position in court. The Justice Department, which typically defends federal laws, asked the court to strike the law’s protections for people with pre-existing conditions along with its mandate that people buy coverage, but leave the rest of the law intact.

Higher courts

It’ll be up to higher courts to decide whether any elements of the law should be struck down -- and, if so, how to unwind policies that are now deeply enmeshed in America’s $3.5 trillion healthcare system.

The ACA has been here before, twice. In the first major legal challenge led by ideological opponents of the law, the Supreme Court in 2012 affirmed that the bulk of the ACA was constitutional, while making Medicaid expansion optional for states. Three years later, the high court left the law intact again.

Five of the current justices on the Supreme Court, including Chief Justice John Roberts, have twice declined to strike down the law. Roberts, now seen as the court’s swing vote, wrote both of the opinions backing the law.