Healthcare stocks surge after King v. Burwell decision

Yesterday's Supreme Court ruling upholding Affordable Care Act subsidies in King v. Burwell is already having a positive impact on healthcare stocks in the hospital and insurance sectors, according to the Associated Press.

Major healthcare organizations, such as HCA Holdings and Tenet Healthcare, saw their shares surge in the wake of the ruling, according to the article. Specifically, Tenet's rose 12 percent to an eight-month high, while HCA's increased 8 percent, according to Yahoo Finance.

The prospect of a ruling striking down the subsidies was a major concern within the industry due to fears that large amounts of the 6.4 million people at risk to lose their subsidies would respond by dropping their health insurance, according to the AP. Recent cuts to programs that paid hospitals to treat uninsured patients, such as the Disproportionate Share Hospital program, only exacerbated these worries. Many providers and state agencies prepared contingency plans in case of such an adverse ruling.

Hospitals pocket as little as 10 percent of the cost of care for uninsured patients, Paul Keckley, managing director of the Navigant Center for Healthcare Research and Policy Analysis, told the AP. "It can be substantially lower than that," he said. "You may collect $100 for the emergency room and bill for $2,000 and never see it."

The decision also came as a relief to providers in states without their own exchanges such as Texas, according to the Wall Street Journal. "The key thing is federal subsidies now stand, no matter where you live," said Ronald DePinho, president of the University of Texas MD Anderson Cancer Center in Houston. Missouri risked a similar disruption if the subsidies were struck down, according to the Kansas City Star; more than 223,000 federal exchange enrollees would have seen their premiums increase an average of 228 percent.

Other factors may contribute to the insurance stock rally as well, such as reports that Aetna plans to acquire its competitor Humana Inc., FierceHealthPayer reported. An announcement on the deal could come as soon as this weekend.

To learn more:
- here's the AP article
- check out the Yahoo Finance article
- read the WSJ article
- here's the Kansas City Star report