What: The Supreme Court has sided with the government in the King v. Burwell case, which challenged the legality of health insurance subsidies for people living in states that opted against establishing their own health insurance exchange.
So What: The King v. Burwell case was brought before the high court to determine whether or not specific language contained in the Affordable Care Act grants the government the ability to offer subsidies to patients signing up for insurance on the federally-run healthcare.gov website.
Specifically, the plaintiffs argued that specific wording of the Affordable Care Act only grants the government with the ability to offer subsidies in states that established their own exchanges.
The government countered the plaintiff's argument by claiming that the ability to offer all Americans an equal chance for subsidies was implied under the law.
Since the Supreme Court sided with the defendant, it ends this debate over Obamacare, leaving subsidies intact for the 6.4 million people who receive them in the 34 states relying on healthcare.gov.
Now What: The decision is especially important to investors because a decision for the plaintiffs could have resulted in millions of insured members cancelling their insurance plans. According to the Kaiser Family Foundation, monthly premiums in the 10 states most affected by a removal of subsidies would have surged by an average 417%.
If that surge in premiums had resulted in mass cancellations of policies, it could have had widespread repercussions across healthcare. Insurers would have lost billions in premium revenue, bad debt expense at hospitals would have jumped, and prescription demand would have fallen. However, since the Supreme Court has left subsidies in place, those risks have been removed, providing clarity and tailwinds for these industries and the stocks within them.