The ongoing soap opera over the Affordable Care Act now focuses on the U.S. Supreme Court, which will decide whether individuals who buy health insurance through federally sponsored exchanges are entitled to a subsidy. If they are not, millions of Americans could be left uninsured and less likely to buy healthcare services. The case is King v. Burwell, which challenges the legality of premium subsidies in as many as 37 states.
Hit to earnings: Valuation experts in the healthcare arena have been following this case because of its potential financial impact on healthcare providers. If the Supreme Court rules against the subsidies, it would mean a “single-digit percentage hit to pre-tax earnings for the publicly traded chains,” according to a report inModern Healthcare. “HCA would see the most significant effect at 3.5% of its estimated 2016 earnings before taxes and other charges, with Tenet following at 2.9%, according to Darren Lehrich, an analyst at Deutsche Bank,” says the report.
The Supreme Court’s decision is expected in June.