Manage Care Stocks Gain on 'Positive' ACA Court Ruling

Managed care stocks are higher Thursday after a Federal appeals court agreed with a lower court ruling that the individual mandate of the ACA was not constitutional. However, the appeals court did not find the entire ACA unconstitutional and sent the case back to the lower court for a more precise review.

"For now, the ACA remains in place, which should be viewed positively for companies in our managed care coverage universe," Cantor Fitzgerald analyst Steven Halper commented.

"With the case now remanded back to the lower court, it is extremely unlikely that the Supreme Court will hear the case before the 2020 Presidential election," he added.

The analyst said the ruling could have been better, if the appeals court simply overturned the lower court decision. That said, they still believe investors were expecting the court to simply uphold the ruling and for the case to go to the Supreme Court sooner rather than later. "That did not occur. Accordingly, we view the ruling as positive," he added.

Within the firm's coverage list, Halper said Centene (NYSE: CNC) clearly has the most exposure to the court ruling given its strong presence in the individual exchange market and to Medicaid expansion. Other companies that benefited from Medicaid expansion include Anthem (NYSE: ANTM), CVS' Aetna segment (NYSE: CVS) and UnitedHealth Group (NYSE: UNH), he added. Cigna (NYSE: CI), Humana (NYSE: HUM) and WellCare (NYSE: WCG) also benefited from Medicaid expansion to some degree.

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