CHICAGO, Nov. 11, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the UnitedHealth Group Incorporated (NYSE:UNH-Free Report), WellPoint Inc. (NYSE:WLP-Free Report), Aetna Inc. (NYSE:AET-Free Report), Tenet Healthcare Corp. (NYSE:THC-Free Report) and HCA Holdings, Inc. (NYSE:HCA-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Healthcare Stocks Hit on Obamacare Challenge
Last week, Republicans took control of the Senate, making the legislative process tougher for the Obama administration. Given that the GOP now control sboth houses of Congress, it's going to be tough for the executive branch to maneuver crucial legislations.
Now, the Supreme Court has agreed to hear a case challenging the subsidies made available by the Affordable Care Act (ACA), better known as Obamacare. If the court rules in favor of the Act's opponents, President Obama's signature achievement may be seriously threatened.
Past Challenges to Obamacare
This is not the first time that the Supreme Court is reviewing the ACA. The constitutional veracity of the Act was upheld by the highest US court after five judges of a nine-member bench voted in favor of the central feature of the ACA. This requires individuals who do not opt for Obamacare to pay a tax.
However, in its ruling, the court also said that it is not mandatory for states to opt for the Medicaid assistance program. This envisages assistance to people with low incomes that the law envisaged as mandatory.
Impact of Federal Subsidies
The new challenge to Obamacare says that the text of the law states that only those individuals who obtain insurance through state-established exchanges will be eligible for federal subsidies. However, 36 states did not set up their own exchanges. This led to a vast number of individuals enrolling on insurance plans via the federally-coordinated exchange Healthcare.gov.
A report published by the Department of Health and Human Services in June this year showed that 87% of individuals signing up for insurance through Healthcare.gov were getting subsidies. At that point, the average monthly premium stood at $82. Taking subsidies into account, those signing up for the least generous plan were paying an average monthly premium of $69 while the highest plan had an average monthly premium of $220.
Spiraling Costs
In the absence of such subsidies, those individuals who have signed up for via the federal website would not be able to afford private insurance. According to a report from the Robert Wood Johnson Foundation, a decision in favor of the plaintiffs would impact 7.3 million individuals projected to receive federal subsidies in 2015.
A decision which eliminates federal subsidies would lead to most healthy people opting out of insurance. Those who continue to opt for coverage would likely be individuals who are grievously ill. This would make them an expensive proposition for insurers. With the number of people opting for insurance declining, the cost of insurance would increase rapidly. As more and more people are unable to afford insurance, the very purpose of Obamacare would be defeated.
Healthcare Stocks Take a Hit
Following, the Supreme Court's decision to hear the new challenge to the ACA, the Health Care Select Sector SPDR declined almost 1%. The sector emerged as the highest loser among the S&P 500 sectors. The two major groups of losers were stocks of hospitals and healthcare insurance companies.
Shares of healthcare insurers such as UnitedHealth Group Incorporated (NYSE:UNH-Free Report), WellPoint Inc. (NYSE:WLP-Free Report) and Aetna Inc. (NYSE:AET-Free Report) dropped 2.7%, 2.9% and 1.9%, respectively. Meanwhile major hospital chains also took losses following the Supreme Court's decision. Tenet Healthcare Corp. (NYSE:THC-Free Report) and HCA Holdings, Inc. (NYSE:HCA-Free Report) each lost more than 4%.
Possible Outcomes
In an opinion piece in the Washington Post last Week, the committee chairmen during the debate over ACA wrote that the case amounted to an attempt to "cherry-pick" the words "established by the State" to prove their point. Some analysts believe that the Supreme Court will rule in favor of supporters of Obamacare.
However, others believe that the decision of the Supreme Court to hear the case in the first place is an ominous sign. At the same time, there are methods of working around such a ruling. States could immediately start working at setting up a state-based exchange. Healthcare.gov could be used in this arrangement, though it would have to be done in a roundabout manner.
But not all of the 36 states without state-level exchanges would move to install them. In this case, the proponents of the law have much to worry about. A ruling is expected in March, and til then healthcare insurers and service providers stocks could face some pressure on this account.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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