Investors in hospital stocks rejoiced Thursday after the Supreme Court upheld a key portion of President Barack Obama's health care overhaul and eliminated the prospect of a sudden influx of uninsured patients seeking care.
Shares of big hospital operators like HCA Holdings Inc., Tenet Healthcare Corp. and Community Health Systems Inc. all jumped much higher than the broader market after the court upheld tax subsidies that play a key role in helping millions of Americans pay for health insurance.
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About 6.4 million people were at risk of losing that aid because they live in states that did not set up their own health insurance exchanges. Opponents of the overhaul had argued that those patients were ineligible for the federal tax credits because the 2010 law stated that exchanges should be established by the state. But the justices said in a 6-3 ruling that the subsidies do not depend on where a person lives.
Investors were worried that many patients would drop their coverage if they no longer had tax credits to help pay for the insurance.
That possibility was made even more daunting because the government had rolled back some extra financial support it used to give to hospitals that treated a high number of uninsured patients before the Affordable Care Act became law. Uninsured patients can leave hospitals stuck with bills that never get paid or for which they receive only a small portion of reimbursement.
This was the second challenge to the law decided by the Supreme Court, which also upheld the law in a 2012 ruling.
The 6-3 vote this time around means the court may be much less likely to grant a hearing on a third challenge, Leerink analyst Ana Gupte said in a research note.
Insurers, hospital operators and other health care stocks have bounced up and down over the years as the overhaul was debated, passed and enacted. HCA shares were up 8.5 percent, or $7.13, to $90.50 in midday trading Thursday, while broader indexes climbed slightly. Tenet climbed nearly 12 percent, or $6, to $56.08; and Community advanced about 10 percent, or $5.37, to $60.65.
Shares of several major health insurers also climbed higher than the broader market but not as robustly as their hospital counterparts. The overhaul gave the managed care sector millions of new customers, but that coverage represents a small slice of total enrollment for those companies.
UnitedHealth Group Inc. was up 2.4 percent, or $2.92, to $122.12; Aetna Inc. advanced $2.20 to $129.71; and Humana Inc. climbed 2.6 percent, or $4.73, to $188.96.