The PPACA Effect: How Stocks Will Fare in Court Ruling on Health Law

"You have the market you have today, plus you have subsidies," says Robert Laszewski, president of Health Policy and Strategy Associates, a consulting firm in Washington D.C. "That's Disneyland, that's fabulous."

Whether investors think the high court is likely to rule this way is another matter. Since the judges began reviewing the case three months ago, they've been selling managed care stocks, pushing a dozen of them down an average 9 percent, according to Bespoke Investment, a research firm.

Just how much of a benefit insurers would see under this scenario is difficult to know. Many insurers do the bulk of their business with employers, with individual policies accounting for a tiny share. At Wellpoint, one of the biggest providers of individual insurance, policyholders getting such coverage make up less than 5 percent of the total.

The Court repeals the entire law

Insurers focused on Medicaid recipients could lose.

Of the estimated 30 million people gaining coverage under the law, more than half are expected to benefit from the expansion of eligibility requirements for Medicaid, the federal-state program for low income families. Take away the law, and you take away those new customers.

But it's unclear how much insurance stocks would fall, if at all. Morningstar's Coffina says he doesn't think Medicaid will pay as much in premiums for the new recipients as they do for the elderly, blind or disabled already in the program. And so he questions whether insurers specializing in Medicaid will lose much if the law is repealed.

The stocks of two big insurers in this area — Centene Corp. and Molina Healthcare — are down more than 30 percent in the past three months. But Coffina says those companies have struggled with mispriced policies and other issues unrelated to the health care law.

For the rest of the insurance industry, not much is likely to change in a full repeal.

The law requires them to provide new benefits such as preventive care with no copayments and coverage for young adults until age 26 on a parent's plan. So it might seem that their costs would fall if the law is struck down.

But insurers are already charging higher premiums for family plans to compensate for these younger customers. And the costs aren't that steep anyway — less than 2 percent in additional annual costs to the insurers, Coffina estimates.

What's more, insurers seem to like the new business. Earlier this month, UnitedHealth Group, Aetna and Humana said they'll continue to allow children to piggyback on their parents policies no matter how the court rules. They also said they will continue to not charge co-pays for preventive care.

One winner could be drug companies. Under the law, they have agreed to pay a fee and cut the price of some medicines. Medicare recipients with high prescription drug costs are getting discounts averaging about $600. The companies could stop offering discounts if the law is repealed, though Wall Street stock experts who follow the industry aren't sure. The drug companies have spent time and energy negotiating the discounts, and so may be reluctant to throw all that work away.

The Court keeps the law

In a sense, health care companies, and their investors, win.

Laszewski, the consultant, says insurers and drug makers know the problems and costs of the law, and have already spent time and money complying with it, and so many don't want to it thrown out. Plus, they fear that the vacuum that a repeal would create could be filled with a more restrictive, more costly overhaul in the future.

"No one really likes this law, but what's the alternative?" Laszewski says. "It's easier to fix a law in place with obvious flaws than starting over from scratch."

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AP writers Tom Murphy in Indianapolis and Mark Sherman and Ricardo Alonso-Zaldivar in Washington contributed to this report.