US Supreme Court Ruling Will Make Or Break Health Care Stocks
2012 is sure to be an exciting year for stocks.
One sector we’re sure to see fireworks in is health care. I know what you’re thinking… “Health care stocks are boring. How can there possibly be ‘fireworks’ in this old defensive sector?”
Well, it comes down to one thing… the US Supreme Court.
Remember, last year Congress passed and President Obama signed the highly controversial Healthcare Reform Act of 2010 into law.
Well, we’re still in the process of phasing in all of the changes. One of the key pieces set to go into effect in 2014 is the individual mandate. In a nutshell, it requires every American to buy health insurance or pay a penalty.
The impact of the mandate is easy to see… an additional 32 million people with health insurance. People who will be paying insurance premiums, going to doctors, buying drugs, and visiting hospitals.
Obviously, health care companies are in favor of expanding health insurance to an additional 32 million people. It will be a boon for business…
However, not everyone is excited about the government requiring individuals to buy health insurance. In fact, the individual mandate has been a hot button topic since the day the legislation became law.
Its constitutionality has been challenged in several lower courts over the last year. To complicate matters further… the lower courts disagree over whether the law is constitutional.
Simply put, it’s a big mess. And the result is a cloud of uncertainty keeping health care stocks in check.
Now, the US Supreme Court is stepping in. They’ve agreed to hear the case in March. And a ruling is expected by late June or early July.
If the law is found to be constitutional… the sector should skyrocket.
It will clear up a lot of the uncertainty that’s been holding the sector back. And it ensures an additional 32 million insured people will be spending money on healthcare services.
If the law is found unconstitutional, it could set the entire sector back years. The cloud of uncertainty will darken. And insurance premiums are expected to rise by a whopping 15% to 20%.
No doubt about it, the Supreme Court ruling will clearly be a make or break moment for health care stocks.
Just remember, the pending Supreme Court ruling adds an additional layer of risk. But, if the law is upheld, (which I think it will be) investing in health care stocks could be one of the most profitable investments of 2012.
Category: Stocks
