Supreme Court begins hearings on ACA constitutionality

The U.S. Supreme Court will hear arguments on the constitutionality of the Patient Protection and Affordable Care Act on March 26, 27 and 28, with a decision expected in June as election season heats up.

Each political party can gain potential advantages, whichever way the justices rule, said Tevi Troy, a senior fellow at think tank Hudson Institute, and a former deputy secretary of the Department of Health & Human Services during the George W. Bush administration.

While Republicans hope the entire law is overturned, that is the least likely scenario, he said. It is more likely the mandate would be overturned and the rest of the law separated from it and upheld.

“Republicans could say we were proved right that Obama had overreached. But that doesn’t mean that scenario is a loser for Obama politically,” Troy said. It could help Democrats energize their base to get Obama re-elected.

Similarly, if the Supreme Court rules in favor of the entire healthcare law, then Republicans would use it to galvanize their forces, saying “this is Armageddon if we don’t elect a Republican president and Congress,” Troy said at a recent briefing sponsored by the Nashville Health Care Council, an association of healthcare industry leaders in Nashville, Tenn.

If re-elected, Obama will drive full implementation of the health reform law. The administration will likely find some kind of patch for the individual mandate if it is struck down.

If a Republican candidate wins the White House, the GOP will slow down execution to the extent that they can. “The Republicans in the House will continue to do guerilla warfare, having hearings, trying to deny or delay funding for the implementation, and the Senate can’t do much of anything,” Troy said.

It is safe to assume that Republicans will retain the House, and the Senate will be closely divided, which means no party will have real working majority in 2014, so repealing the law is unlikely.

In the markets, the publicly traded companies that have the most to lose would be the Medicaid managed care companies, especially those that primarily get their revenue from Medicaid, according to Paul Heldman, senior health policy analyst, Potomac Research Group.

Shares in these stocks have been very highly valued and expensive in anticipation of the expected addition of 30 million newly insured lives when the health reform law takes effect in 2014.
“If the individual mandate were struck, that would probably reduce the incentive to go out to find people to sign up for Medicaid,” Heldman said.

Hospital shares would also suffer. “But at some point there would be recognition that there is still a lot of new business to be had if the subsidies and other parts of the law remain,” he added.

If the justices rule to hold off the case until 2015 because the Anti-Injunction Act bars litigation against new taxes until they have been enforced, that would also create uncertainty about how to invest in the healthcare sector.

Meanwhile, insurers have been establishing pieces of the health reform law since its enactment in 2010 because some provisions went into effect shortly afterwards, like covering older dependents until 26 years of age, eliminating pre-existing conditions for children and removing annual and lifetime dollar limits, said Tony Hullender, senior vice president and general counsel of BlueCross BlueShield of Tennessee.

“You have to re-configure systems, re-write policies, re-write the information of coverage that has to be approved by the state,” he said, adding that payers are geared to 2014.

The environment will be very different for insurers going forward. “We think it will be much more retail-based, a lot more company-to-consumer communication instead of just company-to-employer groups,” Hullender said.

It will also be more cost-based, especially with healthy young adults buying on the exchange, where products may be similar. “They may just look for the cheapest one, and that’s not what we’re used to dealing with,” he said.

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