Market’s ‘Puzzling’ Reaction to the Health-Care Ruling

Just hours after the Supreme Court announced its decision to uphold most of the contested elements of the Affordable Care Act (ACA) Penn and Wharton faculty explored the implications during an on-campus fishbowl discussion.

Wharton faculty members Scott Harrington, professor of health-care management and insurance and risk management, and Jonathan Kolstad, assistant professor of health-care management, were joined by Tom Baker, deputy dean and William Maul Measly Professor of Law and Health Sciences at Penn Law; Dave Grande, assistant professor of medicine at the Perelman School of Medicine; Ralph Muller, CEO of the University of Pennsylvania Health System; and Mary Naylor, Marian S. Ware Professor in Gerontology and director of NewCourtland Center for Transitions and Health at the University of Pennsylvania School of Nursing.

One interesting and immediate result of the Supreme Court decision, said Harrington, was the stock market’s reaction. While the overall market dipped slightly, for-profit hospital stocks were generally up several percentage points, as were Medicare-managed organizations. On the other hand, shares of major health insurers dropped about 3 to 4 percent.

“That’s a little bit puzzling, because the big fear of the health insurance industry was that the mandate would be thrown out,” Harrington said.

Professor Scott Harrington

Naylor lauded the ACA as a step toward a positive change in the U.S. health-care system, but cautioned that it is not a sweeping reform.

“There are going to be winners and losers as systems go through major change,” she said. It is only one step—and there is no telling what could happen to the ACA come November.

The impact on costs and services is also unclear considering the looming 2014 deadline for implementation of many of the reforms, including the individual mandate and state exchanges.

“I think we have to worry about cost,” said Harrington. “We have a lot of people coming into the market, and a lot of people, even with subsidies, are going to face higher premiums.”

With the expansion of Medicaid, he said, there will also be increased demand for health services.

“I’d like to see more discussion about what’s happening on the providers’ side to help ensure that, come 2014/2015, you will have some significant increase in the supply of medical care, or I think we may be facing an environment where waiting times and access actually in the short run appear to be much worse than they were prior to the law,” Harrington continued.

The rules of the game are set, said Kolsted. Big insurance organizations are now moving away from a period of “concern and uncertainty … and have figured out a way to work with [the new regulations].”

Now, only time, and the upcoming presidential election, will tell how the ACA plays out.

Held on June 28, the roundtable event was hosted by the LDI Health Economist, the online publication of the University of Pennsylvania’s Leonard Davis Institute.

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