Obamacare Lawsuit: Republicans Win, Health Insurance Stocks Drop


The stock price of health insurance companies including Aetna (NYSE:AET), Anthem (NYSE:ANTM), Humana (NYSE:HUM), and UnitedHealth Group (NYSE:UNH) declined after Republicans won a lawsuit challenging the implementation of a provision in the Affordable Care Act (ACA) colloquially known as Obamacare.

The shares of Aetna dropped 3% to $108.82 each, Anthem declined more than 2% to $136.38 each, Humana fell almost 2% to $166.98 a piece, and UnitedHealth tanked less than 1% to $129.71 per share around 2:36 PM in New York.

Ruling on the cost-sharing provision of Obamacare

U.S. District Judge Rosemary Collyer ruled that the Obama administration does not have the authority to spend funds on “cost-sharing reduction payments” to insurance companies without an appropriation approved by the Congress.  Judge Collyer is an appointee of President George W. Bush.

The cost-sharing reduction provision of the Obamacare requires insurance companies to reduce co-pays, coinsurance, deductible, and out-of-pocket maximum) for covered benefits in a policy period. The federal government will reimburse insurance companies for those costs

The Obama administration interpreted the cost-sharing provision as a federal spending that does not need an authorization from the Congress. The healthcare reform law already guaranteed the funds for such payments in the same section better known as tax credits that help people pay for their insurance.

However, Republicans in the House of Representatives disagreed and argued that it is unconstitutional for the administration to spend money on such payments without the approval of the Congress.

In her ruling, Judge Collyer wrote, “Such an appropriation cannot be inferred. None of Secretaries’ extra-textual arguments — whether based on economics, ‘unintended’ results, or legislative history — is persuasive. The Court will enter judgment in favor of the House of Representatives and enjoin the use of unappropriated monies to fund reimbursements due to insurers under Section 1402.”

Judge Collyer stated her ruling pending appeal therefore it has no immediate impact on the Obamacare. The Republicans filed a series of lawsuits to block/ repeal the implementation of the healthcare law.

White House comment on the ruling

White House Press Secretary John Earnest commented, “This is not the first time that we’ve seen opponents of the Affordable Care Act go through the motions to try to win this political fight in the court system.”

He added that the Republicans are trying to “refight a political fight that they keep losing. They’ve been losing this fight for six years, and they’ll lose it again.”

Furthermore, Earnest said, “This suit represents the first time in our nation’s history that Congress has been permitted to sue the executive branch over a disagreement about how to interpret a statute.”