Most of Health Law Survives; Stocks Swing Big on News

SCOTUS has spoken on the Affordable Care Act, and the decision is already causing health care stocks to move.

The Supreme Court upheld the vast majority of the law, including the individual mandate, the requirement that nearly all Americans obtain health insurance by 2014 or pay a penalty. Chief Justice John Roberts voted with the Court’s more left-wing members to uphold the majority of the act. The mandate can be considered a tax, said Roberts, and falls within Congress’ authority to levy taxes. The court said Congress can’t cut existing Medicaid funds to states that don’t comply with the law’s provisions — that appears to be the most significant challenge to the law in the opinion.

Health care stocks swung on the news.

Trading was briefly halted for both Wellpoint (WLP) and Humana (HUM) shortly after the ruling with both stocks down big. Health insurers face new rules in the law — including penalties if they spend less than 80% of their premiums on health costs, and it’s unclear how much they will benefit from new state-run insurance exchanges that will give people more options for buying insurance. Companies that offer Medicaid plans like Molina Healthcare (MOH), however, are soaring, as the law is expected to expand Medicaid rolls.

Big drug companies like Pfizer (PFE) are down — the new law will cost them in fees and rebates even though it could help them as more insured people can get drugs.

Trading was also halted for hospital operator Community Health Systems (CYH) with shares up about 9%. Tenet Healthcare (THC) shares were also halted with the stock up more than 10%. Hospitals were expected to benefit from the law being upheld as they will have to deal with less uncompensated care and may get more patients.