Today's U.S. Supreme Court decision on Obamacare doesn't alter the fundamental economic issues I wrote about in my last column on the subject, but it does greenlight investors who've been hesitant to take positions in health-care and insurance companies.
As I write this column, Aetna (AET) is up 1.5% to a new all-time high, with similar gains for Cigna (CI), Anthem (ANTM), and UnitedHealth Group (UNH).
In fact, Aetna is up 272%, Cigna 362% and UnitedHealth 265% since President Obama signed the Patient Protection and Affordable Care Act (i.e., Obamacare) into law on March 23, 2010. (Anthem didn't start trading until December 2014.)
Even since the Supreme Court heard arguments back in March on today's case, Aetna has risen 5%, Cigna 36%, UnitedHealth 7% and Anthem 15%.
Investors appear to have rightly assumed that the Supreme Court would rule in favor of Obamacare in the case, which challenged the constitutionality of subsidies for consumers who buy health insurance through state-sponsored exchanges vs. federal ones.
More importantly from the perspective of potential future lawsuits or congressional efforts to kill Obamacare, today's stock-market gains are a signal that the financial sector supports the law. As such, it's highly unlikely in my opinion that any further legal or legislative challenges to the act will arise -- regardless of what some politicians say.
The fact is that Obamacare is now the law of the land permanently, or at least until it's replaced or amended by some other legislative alternative.
And for those who want to go back to the pre-Obamacare world, I'm of the opinion that any amendment or replacement will actually be in the opposite direction -- moving toward a "single-payer," federally funded health-care insurance system. However, such a process will take years to happen if it happens at all.
In the meantime, today's ruling and its implications for Obamacare's permanence create challenges for both politicians and investors. Ever-rising health-care expenses offer both a drag and a potential for the U.S. economy, and politicians will eventually have to address this issue.
The most probable next push will be to regulate what both insurance and health-care providers charge. Part of that process is already underway, with President Obama advancing a proposal to allow the U.S. government to negotiate with pharmaceutical companies for lower Medicare drug costs.
Big Pharma's shareholders apparently realize that today's ruling makes them the next target for health-care cost containment. The largest of pharma stocks (listed in descending order of market capitalization) are Johnson & Johnson (JNJ), Pfizer (PFE), Merck (MRK), Novo Nordisk (NVO), Sanofi (SNY), Bristol-Myers Squibb (BMY), GlaxoSmithKline (GSK), Eli Lilly (LLY) and Abbott Labs (ABT).