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Analysis

Health Insurance Stocks Jump After Fifth Circuit ACA Ruling

By Jack O'Brien  
   December 19, 2019

Centene, Molina, and WellCare Health Plans were all trading up over 2.5% in the early trading session Thursday morning.

Health insurance stocks greeted the Fifth Circuit Court of Appeals' decision to rule the Affordable Care Act (ACA)'s invidiual mandate as unconstitutional during the early trading session Thursday morning. 

Centene Corp. led the way, trading up nearly 4%, while WellCare Health Plans, its potential partner, was trading up 2.6%. 

In August, Centene announced that it planned on expanding health plans through the ACA exchanges in 10 states in 2020. The insurer served almost 2 million exchange members by the middle of 2019 and many view its pending $17.3 billion merger with WellCare as a way to further cement its ACA business.

Meanwhile, Molina Healthcare Inc., another insurer with a significant portion of its business based on the ACA marketplace, was trading up 3.5%.

Despite the positive activity on Wall Street for payers, Moody's Investors Service commented that the ruling was credit negative for health insurers.

"A federal appeals court ruled that the ACA individual mandate is unconstitutional, but did not strike down the whole law," Dean Ungar, vice president of Moody's Investors Service, said in a statement. "Instead, it asked the lower court to determine which parts of the law can remain and whether it applies nationwide. This is credit negative for US health insurers because the uncertainty will continue, likely beyond the 2020 presidential election."

Insurance stocks reacted better to the Fifth Circuit Court's ruling compared to when a federal judge in Texas ruled that the ACA was unconstitutional last December.

Related: Healthcare Stocks Sink After Texas ACA Ruling

Among other insurers, UnitedHealth Group traded slightly above 1.1%, Anthem Inc. traded up nearly 1%, and CVS Health Corp. traded up around 0.9%. Cigna Corp. inched up around 0.12% by 10:15 a.m.

Humana Inc. was the only major insurer trading down Thursday morning, falling by about 0.5%.

Related: Healthcare Sector is One of the Stock Market's Healthiest Sector Right Now

For-profit hospital stocks also saw a boost after the ruling, with Universal Health Services and HCA Healthcare both trading up 1.6%, Tenet Health Corp. was trading up 1.2%, and Community Health Systems was trading up about 1%.

Meanwhile, Quorum Health Corp. was trading down more than 2.1%. 

Related: ACA Ruling Dismays Hospitals, as Law's Defenders Look to Supreme Court

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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