NEW YORK (Reuters)—The U.S. hospital and health insurance industries breathed a collective sigh of relief on Thursday after the U.S. Supreme Court upheld subsidies for individuals under President Barack Obama’s signature healthcare law.
Shares in hospitals surged, with several hitting all-time highs, on the expectation that patients would be able to continue paying for services. Health insurer stocks also gained. Wall Street analysts called the ruling positive for an industry on the edge of consolidation.
Health economists have estimated $15 billion to $22 billion in healthcare spending was at risk with the decision. About 10 million Americans have insurance through the healthcare law’s insurance exchanges and, of those, 6.4 million have subsidies.
The court ruled 6-3 that the 2010 Affordable Care Act (ACA), widely known as Obamacare, did not limit subsidies to states that establish their own online healthcare exchanges. It marked the second time in three years that the high court ruled against a major challenge to the law.
Trinity Health, one of the largest not-for-profit health systems, was holding a board meeting when the ruling hit.
“There was a ‘Yahoo!’ and a big round of applause,” Dr. Richard Gilfillan, chief executive of the Livonia, Michigan-based hospital chain said.
Insurers said subsidies were key to bringing in new customers.
“For a lot of the individuals who were depending on these subsidies in order to have coverage, I think it is a major sigh of relief,” said J. Mario Molina, chief executive of insurer Molina Healthcare.
Annie Wisecarver, 53, of Shepherdstown, West Virginia, receives a monthly subsidy of about $200 to buy Obamacare insurance.
“I really only purchased insurance for an emergency, like if I fell off a mountain and broke my leg,” Wisecarver said. “I can’t see myself spending $300 or $400 a month on insurance just because I might have an accident.”
The ruling could remove uncertainty for the insurers who are seeking deals, like Anthem Inc and Aetna Inc, Leerink Partners analyst Ana Gupte said.
Anthem is pursuing an acquisition of Cigna even after being rejected, while sources previously told Reuters that Humana put itself up for sale last month, with Cigna and Aetna making offers. Bloomberg reported on Thursday that an Aetna-Humana deal could be reached as soon as this weekend.
‘Peace of Mind’
Since the subsidies were introduced last year, they have helped hospitals reduce the losses from covering the cost of uninsured patients.
“It’s just a very positive thing because it takes away the overhang on the company and the industry,” said Alan Miller, CEO of Universal Health Services, which has hospitals in 37 states.