Analysts: Ruling won’t hurt credit
The Supreme Court decision on the Patient Protection and Affordable Care Act is not expected to affect the credit outlooks of healthcare companies, analysts at ratings agencies said. The court will hear three days of oral arguments, totaling a monumental six hours, starting Monday. Chief among the issues is whether the government can require U.S. citizens to buy health insurance.
“We believe the mandate is necessary in order for the ACA to at least partially share risk and avoid adverse selection,” the analysts at Fitch Ratings wrote in a news release.
Martin Arrick, managing director at Standard & Poor’s, similarly noted that if payers are required to offer coverage regardless of health history or pre-existing conditions, individuals won’t be incentivized to pay into a plan until they need it. “If you lose the mandate, you have to lose the required underwriting section,” he said. “That is the ultimate adverse selection mandate.”
In addition, the individual mandate has created time pressure to cut costs—which would be lost if the provision is struck down.
Still, Kevin Holloran, a director at Standard & Poor’s, noted that hospitals have been operating as if the law will be upheld in its entirety.
If the court decides the law is constitutional in its entirety, Fitch analysts said they see higher volumes canceling out any decrease in margins stemming from implementation costs.