An­a­lysts: Rul­ing won’t hurt credit

Modern Healthcare - - THE WEEK IN HEALTHCARE -

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.

—Beth Kutscher

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