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Supreme skepticism boosts WellPoint stock

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However the U.S. Supreme Court ends up ruling on President Obama’s health reform law, WellPoint Inc. and its health insurance peers already owe a big thank you to the nation’s top justices.

Indianapolis-based WellPoint’s stock price shot up nearly 11 percent last week—and its peers weren’t far behind. That’s because investors, like most observers, didn’t expect such harsh questioning of the law from even perceived “swing“ votes on the court, such as Chief Justice John Roberts and Justice Anthony Kennedy.

"Going into the debate on the mandate, there was almost a sense of complacency out there that the mandate would stand, as would the law," CRT Capital analyst Sheryl Skolnick told the Reuters news service. "Investors were thrown a curve ball."

The favorable reaction from Wall Street came not only because harsh questioning by the court’s conservative justices put in doubt the law’s “individual mandate” that all Americans buy health insurance, but also because the justices raised the possibility that they would strike down requirements that insurers accept all customers, regardless if they are already sick or not.

The Obama administration itself argued that the justices, if they decide that the individual mandate is unconstitutional, also should eliminate the law’s requirements that health insurers accept all patients and another provision that says insurers must base all customers’ premiums on the health of the entire “community” in which that person lives, not on his or her individual health status.

The group of 26 states—including Indiana—that filed the lawsuit challenging the health reform law pushed the justices further, saying that if the individual mandate falls, the entire law should be thrown out with it.

From investors’ standpoint, either result would be better for health insurers than the worst-case scenario they feared: that the individual mandate would be struck down while the other requirements would stand.

That outcome would have prevented WellPoint and its peers from gaining some 30 million new customers, while still leaving them on the hook to pay the bills of patients who waited until they were sick to start paying premiums—premiums that would be restricted in price by the overall health of the community.

The stock prices of WellPoint’s main competitors—Hartford-based Aetna Inc., Philadelphia-based Cigna Corp., Louisville-based Humana Inc., and Minnesota-based UnitedHealth Group—each saw their stock prices rise between 7 percent and 10 percent last week.

"People at this point have pretty much dismissed the potential for an adverse outcome here, which would be the individual mandate gets tossed and everything else remains the same," Susquehanna Financial Group analyst Chris Rigg told Reuters.

That’s the current sentiment, but it is far from certain, Indianapolis health care attorneys Greg Pemberton and Taryn Stone noted in written commentary about last week’s hearings on the Patient Protection and Affordable Care Act.

“Ultimately, the challenge to the severability of the individual mandate provision from the rest of the Act is fundamentally a question of congressional intent. Would Congress have intended the entire Act to fall if the individual mandate is found unconstitutional?” wrote Pemberton and Stone, who are part of the law firm Ice Miller LLP. They concluded, “At this point, there is no clear indication on how the Court will rule.”

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  1. These liberals are out of control. They want to drive our economy into the ground and double and triple our electric bills. Sierra Club, stay out of Indy!

  2. These activist liberal judges have gotten out of control. Thankfully we have a sensible supreme court that overturns their absurd rulings!

  3. Maybe they shouldn't be throwing money at the IRL or whatever they call it now. Probably should save that money for actual operations.

  4. For you central Indiana folks that don't know what a good pizza is, Aurelio's will take care of that. There are some good pizza places in central Indiana but nothing like this!!!

  5. I am troubled with this whole string of comments as I am not sure anyone pointed out that many of the "high paying" positions have been eliminated identified by asterisks as of fiscal year 2012. That indicates to me that the hospitals are making responsible yet difficult decisions and eliminating heavy paying positions. To make this more problematic, we have created a society of "entitlement" where individuals believe they should receive free services at no cost to them. I have yet to get a house repair done at no cost nor have I taken my car that is out of warranty for repair for free repair expecting the government to pay for it even though it is the second largest investment one makes in their life besides purchasing a home. Yet, we continue to hear verbal and aggressive abuse from the consumer who expects free services and have to reward them as a result of HCAHPS surveys which we have no influence over as it is 3rd party required by CMS. Peel the onion and get to the root of the problem...you will find that society has created the problem and our current political landscape and not the people who were fortunate to lead healthcare in the right direction before becoming distorted. As a side note, I had a friend sit in an ED in Canada for nearly two days prior to being evaluated and then finally...3 months later got a CT of the head. You pay for what you get...

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