(Updated with details on states being allowed to opt out of the
Medicaid expansion that Obamacare calls for.)
The U.S. Supreme Court ruled today to uphold the requirement
that individuals be insured in President Obama's healthcare
overhaul, but also objected to the expansion of Medicaid under the
2010 law-a mixed ruling that was affecting various
health-care-related ETFs differently on a day the broader market
fell.
The divided 5-4 High Court ruling, which featured Chief Justice
John Roberts breaking with conservative colleagues in writing the
majority opinion, deemed the so-called mandate to be the equivalent
of a tax. Preserving the mandate means that by 2014, 32 million new
individuals will join the pool of customers for drug companies and
health care service and equipment providers.
Still, the Wall Street Journal reported that the Court made
changes to the Medicaid portion of the law, which could limit the
impact all those new patients will have on the bottom lines of
health-care-related companies, and might explain why some health
care ETFs, such as those focused on biotech, fell more sharply than
the broader market.
A total of 19 health-care-related ETF are now listed in U.S.,
excluding inverse and leveraged funds, according to IndexUniverse's
"Fund Finder." The broad and popular $4.65 billion Health Care
Select Sector SPDR Fund (NYSEArca:XLV) ended about 0.5 percent
lower at $37.30 -a bit deeper in the than the broader stock
market.
The Dow Jones industrial average retraced most of its early
losses to close 24.75 points, or 0.2 percent lower, at 12,602.26.
The earlier losses were linked largely to J.P. Morgan Chase's
revelations that trading losses related to the "London Whale" might
be as much as $9 billion, or more than four times greater than its
initial $2 billion estimate.
Differing Performance
Just over half of XLV is in pharmaceuticals, its biggest
subsector allocation. The rest of its top five allocations
are:health care equipment at 16 percent, biotechnology at 11
percent, managed health care at 9 percent and health care services
at 5 percent.
XLV's performance was bookended on the one hand by the $1.96
billion iShares Nasdaq Biotechnology Index Fund
(NasdaqGM:IBB)-which fell more than 2.6 percent to $126.55
and, on the other end, by the iShares Dow Jones U.S. Healthcare
Providers Index Fund (NYSEArca:IHF)-which closed $1.00 or 1.57
percent higher, at $64.88 a share.
IHF's relatively strong performance was consistent with a Wall
Street Journal report saying stocks of hospital companies were
benefiting from the Supreme Court decision. The newspaper also said
insurers were hit harder than other areas of the health care
industry.
"S&P Capital IQ believes the best-case scenario for the
health care industry would be for the Court to rule that the
individual mandate is constitutional and that the entire law
remains intact," Jeffrey Loo, an analyst at Standard & Poor's,
wrote in a report published earlier this month.
Loo's most-favorable outcome isn't exactly what transpired,
given that the High Court made changes to Medicaid, as the Wall
Street Journal reported.
The Supreme Court is allowing individual states to opt out of
the expansion of Medicaid that the law calls for, so it's not yet
clear just how different the Patient Protection and Affordable Care
Act will look following the highly anticipated Supreme Court
decision.
That Medicaid-related wiggle room gives credence to something
else Loo warned about in his note:"This ruling would not change the
opposition voiced by numerous states and many Republicans."
Loo also reminded readers that 26 of 50 U.S. states actually
filed petitions to block the landmark legislation that was passed
by the U.S. Congress in March 2010.
The landmark legislation requires the establishment of
marketplaces within each state by 2014 to help currently uninsured
Americans obtain health insurance.
Just 14 states have such health care exchanges, which allow
customers to compare and shop for health insurance.
Permalink | 'copy; Copyright 2009 IndexUniverse LLC. All rights
reserved
Don't forget to check IndexUniverse.com's ETF Data
section.
Copyright ®
2012 IndexUniverse LLC
. All Rights Reserved.