IBJNews

Supreme skepticism boosts WellPoint stock

Back to TopCommentsE-mailPrintBookmark and Share

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.”

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.

ADVERTISEMENT