What Does The Supreme Court’s Obamacare Ruling Mean For UnitedHealth?

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UNH: UnitedHealth Group logo
UNH
UnitedHealth Group

On Thursday, June 25, the Supreme Court upheld the healthcare subsidies allowed by the Affordable Care Act, or Obamacare, a big victory for supporters of the legislation. While the impact that Obamacare would have on health insurance companies was initially uncertain, the market now clearly views it as a positive, as evidenced by a 3% jump in morning trading for the stock of UnitedHealth Group (NYSE:UNH), the country’s largest insurer. Here’s why this ruling is a good thing for UnitedHealth and its competitors:

  • Subsidized Customers Get To Keep Their Insurance: While this is certainly a positive for consumers who are currently receiving healthcare subsidies, it also benefits insurers such as UnitedHealth. These customers do not qualify for Medicaid, but may not be able to afford private health insurance without the subsidies. Maintaining these subsidies means that the private health insurance market should be able to sustain its growth going forward. Furthermore, UnitedHealth should be able to maintain its industry-leading market share in private health insurance (as some enrollees may have dropped their coverage without subsidies), which is a major business for the company.
  • How Much Does UNH Benefit? Approximately 6.4 million Americans receive subsidies for their insurance – while it’s unclear how many of these are UnitedHealth customers, applying the company’s 15% market share and $125 average monthly revenue per enrollee (which is likely conservative in this case due to differences between employer-sponsored vs. individual healthcare) would imply that UnitedHealth could be generating nearly $1.5 billion in revenues from subsidized health plans.
  • Mandates Also Likely To Remain In Effect: The individual and employer mandates, which require individuals to have health insurance and most employers to provide it for their employees, are also likely to remain in effect with this ruling. According to CBO estimates, these mandates have resulted in over 5 million previously uninsured people (not including those who qualify for Medicare and Medicaid) signing up on the healthcare exchanges. Without the mandate or subsidies, these individuals could choose to go back to being uninsured, which could have a dramatic impact on health insurers.

Overall, this is an extremely positive development for the health insurance market in general, and UnitedHealth specifically. Have any thoughts on other implications of this ruling? Let us know in the comments section, and see the links below for more analysis and information:

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