Please ensure Javascript is enabled for purposes of website accessibility

Here's What Sliced $31 Billion From UnitedHealth Group in December

By Cory Renauer – Updated Apr 14, 2019 at 4:42PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The latest challenge to the Affordable Care Act has investors more nervous than usual.

What happened

Shares of UnitedHealth Group (UNH 0.67%), America's largest health insurer, fell 11.5% in December, according to data from S&P Global Market Intelligence. A federal judge in Texas struck down the Affordable Care Act last month, inciting frightened investors to lop $31 billion from the health insurer's market cap.

Check out the latest UnitedHealth Group earnings call transcript.

So what 

The Affordable Care Act (ACA) expanded Medicaid to families that earn between 100% and 138% of the federal poverty level. For those who earn more, it also provides generous subsidies to help pay for premiums, up to a point. For example, a family of four with annual income between $34,638 and $100,400 can receive $14,928 in 2019 to help pay insurance premiums for plans purchased through the ACA marketplace.

Person looking at a downward sloping arrow.

Image source: Getty Images.

UnitedHealth Group tumbled last month because it's been a beneficiary of the ACA. The company serves 6.6 million Medicaid patients and 495,000 customers with marketplace plans.

The ACA really hasn't boosted UnitedHealth Group's customer base that far. The company reported 49 million total customers at the end of September.

Now what

The judge contends that since the penalty for not having insurance has been lowered to $0, the entire set of laws is unenforceable. It's a weak argument, and the Trump administration intends to enforce the ACA pending an expected appeal of the decision. That means there's little chance of any big changes for at least a couple of years.

In the court of public opinion, the ACA's winning by a landslide. A poll the Kaiser Family Foundation conducted in November found three-quarters of the general public and at least a majority of Republicans have a favorable view of the following key provisions:

  • Subsidies to help with individual plan premiums.
  • Dependent coverage through age 26.
  • A marketplace where individuals can shop for insurance plans.
  • Elimination of out-of-pocket expenses for preventative services.
  • Protections for pre-existing conditions.
  • Closing of the Medicare Part D coverage gap, or "doughnut hole."

Allowing these provisions to die seems like political suicide, but technically the ACA's future is in the hands of appointed Judges. If the ACA somehow goes belly-up a few years from now, though, losing several million among a customer base of 49 million won't be the end of the world for UnitedHealth Group.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

Stocks Mentioned

UnitedHealth Group Stock Quote
UnitedHealth Group
UNH
$542.91 (0.67%) $3.59

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.