Health Stocks Live in Limbo Until Supreme Court Decision

Given that a monumental, game-changing decision from the Supreme Court is right around the corner, health care stocks are sort of limbo right now.

So far 2012 has been a great year for health care stocks, with the sector up 7% since the beginning of the year, and 3% this month alone. But the ultimate fate of the Affordable Care Act could really affect the sector.

Particularly vulnerable to the Supreme Court decision are hospital stocks. If the law is upheld, that’s great news for those stocks, which could be up by 5% to 10%, according to The Wall Street Journal. However, if the law is unconstitutional, hospital stocks could decrease by 5% to 10%.

During the arguments in March, investors got a little jittery, sending the stocks of health insurers and hospitals down. So as well as the sector has been performing, it should have been doing better during this weak economy, according Yahoo! Finance. Unfortunately, the wait for a Supreme Court decision has hung over the head of the industry.

However, the overall sector should be okay if the law is struck down, according to SeekingAlpha. After all, if ACA is considered unconstitutional, it’s essentially a Mulligan: the game resets and things go back to how they were before the law passed. The sector would gain, however, if the law is upheld.

“If the Court throws out the individual mandate but keeps the rest of the health care law, the concessions and costs associated with the potential 32 million new insured would remain but without the benefit of more paying customers,” SeekingAlpha’s Tom Lydon writes. “Sub-sectors that would take the brunt of the hit, including pharmaceuticals, health care facilities, managed health care and health care services.”

Even without the health care reform law in place, the health sector stands to gain in the future because of the aging population. All those issues in America’s health that prompted health reform will still be around.

One fund manager suggested that certain big companies will be happy no matter the outcome because “they'd benefit from more insured patients as much as they would from less regulation,” according to Yahoo! Finance.

However, at MarketWatch, the opinion goes against the grain. The site suggests that no matter the decision, any large reaction will be short lived.