Centene, Other Obamacare-Related Stocks Rise as Resolution to Dispute Over Law Is Deferred

A federal appeals court found the individual mandate in the law unconstitutional. But it sent the case back to a lower court for further review.
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Republicans lauded a federal appeals court’s ruling that a key section of the Obamacare law is unconstitutional. But stocks exposed to what is officially the Affordable Care Act are rising as a resolution to the matter isn't likely in the near term.

The U.S. Court of Appeals for the Fifth Circuit in New Orleans said the requirement that people have health insurance was unconstitutional. But it sent the rest of the law back to a lower court to review which aspects could survive without the individual mandate.

U.S. District Judge Reed O’Connor in Fort Worth had earlier ruled that the entire law was unconstitutional.

The New York Times and other publications have reported that that review will take some time. On Thursday, a number of stocks with exposure to the ACA are higher because a resolution to the matter isn't imminent.

Centene  (CNC) - Get Report gained 3% to $62.14. The St. Louis health-care company derives about 16% of its revenue and a third of its earnings per share from government issued insurance, according to a Cowen note.

“As it stands, the court's ruling that the individual mandate is unconstitutional should have no impact on exchange markets," analyst Charles Rhyee wrote.

"Given that most individuals on the individual exchanges have their premiums heavily subsidized, we do not expect a meaningful impact on enrollment. These parts of the law will also remain in place pending a final decision, which we expect to come from the Supreme Court, likely in 2021.”

Molina Healthcare,  (MOH) - Get Report the Long Beach, Calif., health-care-services provider, gained 3.1% to $137.48. The company derives 11% of revenue and 15% of its EPS from ACA exposure. 

Shares of the Indianapolis health-benefits firm Anthem  (ANTM) - Get Report are up 1.7% to $298.05. The company pulls in about 3% of revenue and about 2.4% of EPS from the ACA, according to Cowen’s note. 

The researchers at Action Alerts PLUS also published a note highlighting the ins and outs of the court's recent decision. Read their take here