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Judge Reed O’Connor’s Obamacare ruling triggers Wall Street sell-off

December 18, 2018 GMT

Companies with big footprints in Obamacare’s expanded markets saw their shares drop Monday, the first trading day after a federal judge ruled the 2010 health care law as unconstitutional.

They face a new era of uncertainty, with hospitals contemplating the loss of billions of dollars over the costs for uninsured patients and insurers trying to figure out what their customer base could look like should the ruling be upheld on appeal.

For now, that’s not a concern. The judge put his decision on hold pending the results of appeals.

Still, the American Hospital Association said it was “extremely disappointed” with the ruling but isn’t panicking just yet.

“I think it’s a blip,” said Melinda Hatton, general counsel for the hospital group. “Wall Street, like everybody else, will recover their senses.”

But investors were skittish Monday. Shares of Centene (-4.8 percent), Molina Healthcare (-8.9 percent) and HCA Healthcare (-2.8 percent), a for-profit hospital operator, fell amid an overall market sell-off in which the Dow Jones Industrial Average dropped 508 points, or 2.1 percent.

Judge Reed O’Connor said Friday night that the tax overhaul Congress approved a year ago, which zeroed out the “individual mandate” tax penalty for shirking insurance, invalidated the rest of the sweeping health care law.

It was a broader ruling than many analysts expected, and it sent Congress into a frenzy trying to figure out its next steps.

Key Democrats urged calm, hoping to prevent a loss of confidence in the Affordable Care Act, which is still conducting open enrollment in some states for the 2019 season.

“This ruling is not impacting your health care right now,” said Rep. Frank Pallone Jr., the New Jersey Democrat who will lead the House Energy and Commerce Committee next year. “I don’t want people to be confused and think that somehow they’re being denied their health insurance.”

Democratic state attorneys general, who stepped in to defend the law after the Trump administration begged off, have vowed to appeal Judge O’Connor’s decision. Legal analysts said it could well be overturned or narrowed as the case climbs the judicial ladder.

The top insurers lobby called the ruling “misguided and wrong,” and the American Psychiatric Association said it could lead to “an unconscionable result.” The American Medical Association said blowing up Obamacare would roll back federal policy to 2009.

“No one wants to go back to the days of 20 percent of the population uninsured and fewer patient protections, but this decision will move us in that direction,” said AMA President Barbara L. McAneny.

Roughly 10 million Americans get their insurance through the exchanges, and millions more signed up under expanded Medicaid eligibility. Under the law, young adults are able to stay on their parents’ plans until age 26.

Seniors who pay out of pocket in Medicare’s coverage gap, or “doughnut hole,” also could see rising costs. Analysts said other parts of the law such as changes to the Indian Health Service and rules governing how plans under Medicare Advantage get paid don’t get as much attention.

“If this decision doesn’t get stayed or overturned soon, you are going to have a humanitarian catastrophe on your hands virtually overnight,” said Sen. Christopher Murphy, Connecticut Democrat.

At least one insurer is making contingency plans. Centene said in the “unlikely event” the courts strike down Obamacare, the company will file to offer plans that maintain protections for sicker Americans.

“Current members will be able to enroll in this new product without health underwriting and irrespective of pre-existing conditions,” said Michael Frederic Neidorff, chairman and CEO.

Where some saw chaos, President Trump saw opportunity. He said the ruling, if upheld, would give both parties a chance to start over on health care after the Republican-led Congress failed to deliver him a replacement last year.

“We have a chance, working with the Democrats, to deliver great HealthCare! A confirming Supreme Court Decision will lead to GREAT HealthCare results for Americans!” he tweeted Monday.

Democrats, though, signaled that they are more intent on battling to save the law than working on a replacement.

Insurers vowed to maintain a steady hand through the appeals process, which runs through the 5th U.S. Circuit Court of Appeals and could reach the Supreme Court.

“The ACA will remain in effect for 2019,” Molina Healthcare said. “And we are optimistic that it will remain in effect thereafter.”