Obamacare Market Panic Creates a Buying Opportunity

(Bloomberg Opinion) -- The words “Obamacare” and “unconstitutional” in quick succession made for scary weekend reading in the health-care community, and that fear played out in a market rout on Monday — the first chance shareholders had to react to a Texas judge’s decision late last week to strike down the law. 

But a massive sell-off arguably isn’t warranted. Uncertainty is unpleasant, but the Affordable Care Act isn’t going away any time soon, and most likely isn’t going anywhere at all. 

Obamacare Market Panic Creates a Buying Opportunity

I don’t dispute that this ruling, in a case brought by Republican state attorneys general, would be catastrophic if it held up. More than 20 million people obtain health coverage via the ACA’s individual exchanges and its expansion of Medicaid to more lower-income Americans, making it a major source of enrollment and potential future growth for insurers. Revoking the law could put hospitals on the hook for more unreimbursed medical treatment. 

Obamacare Market Panic Creates a Buying Opportunity

But the ACA appears set to remain the law of the land through what may be a lengthy appeal process. And investors seem to be overestimating the possibility that this decision will stand. Even conservative legal scholars think that Judge Reed O’Connor went too far in ruling that Congress rendered the whole ACA unconstitutional last year when it zeroed out the tax penalty on individuals for not having insurance. 

It’s a settled legal principal that when part of a law is struck down, the remaining pieces should be left standing unless Congress has made it clear that it thinks the entire legislation should be thrown out. In this case, Congress arguably sent the exact opposite signal by opting to remove the penalty for not meeting the individual mandate, while keeping the rest of the law in place. The fact is, when lawmakers had the option to more broadly dismantle the ACA, they chose not to or were unable to garner sufficient support. 

On a practical note, it was clear before it was eliminated that the individual-mandate tax isn’t the be-all and end-all for the ACA. People skipped insurance in spite of the penalty and are continuing to enroll without it, and insurers have expanded into new markets and lowered premiums knowing that it wouldn’t be in place next year. 

Many in the GOP with the slightest instinct for self-preservation should be working to head off the possibility that the ACA might suddenly be wiped out. A number of the law’s provisions are widely popular, and to suddenly pull them would be a political and public-health disaster. Not to mention that the party has yet to propose a workable alternative, although it’s possible that the GOP, working with Democrats, might take legislative action to counteract the ruling.

The prospect of another year of Obamacare uncertainty is obviously unpleasant for investors. But those willing to endure a bit of discomfort may reap rewards when the program once again demonstrates its impressive ability to survive anything opponents throw at it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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