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Healthcare Ruling Boosts Health Stocks

June 26, 2015


Supreme Court ruling and rumoured takeover bid for Humana gives share prices a boost.

Yesterday’s Supreme Court ruling to uphold the Affordable Care Act, a lynchpin in President Barack Obama’s healthcare reform programme, has led to a rise in the prices of stocks in healthcare firms. Rumours of a possible deal by Aetna to acquire Humana Inc, the second-largest U.S. health insurer based on market value, have also helped to instigate the rise in share prices for numerous healthcare companies and hospitals.

The reports, initially circulated by online news magazine Bloomberg, estimated that ‘any proposal would probably value Humana above its $28 billion market capitalization’. The article also asserted that Humana had received a second offer from Cigna. News of this has also raised Humana and Aetna’s own stock prices.

Last week, Cigna itself was the subject of an offer, which was subsequently rejected, by Anthem Inc, with the company stating that ‘the Cigna Board has unanimously determined the proposal is inadequate and not in the best interests of Cigna’s shareholders’.

Shares in HCA Holdings, the Hospital Cooperation of American, rose 9%, whilst Tenet Healthcare, saw their stocks rise an impressive 12.29%. Another firm whose stock price rose dramatically was Community Health Systems, whose shares rose 13%. Universal Health Services also benefitted, with their shares rising 7.73%.

The upholding of the Affordable Care Act safeguards the healthcare benefits of approximately 6.4 million Americans. Many Republicans have been vehemently opposing the scheme since its instigation in 2010.  The ruling was upheld 6-3 in favour of the notion that the offering of the subsidies should not depend on which state the recipient lived in. The average subsidy is $272 a month which is provided in order to help towards the cost of insurance.