Supreme Court Shakeup Adds Complexity for Healthcare

With Justice Ruth Bader Ginsburg's death Sept. 18, another layer of complexity has been added to this election year for the healthcare industry. The Supreme Court is scheduled to hear oral arguments on the Affordable Care Act on Nov. 10, a week after the U.S. election. Prior to Ginsburg's death, the court looked likely to uphold the ACA at least along the previous voting lines (5-4), but without her vote, the path to upholding the law just got more complicated, creating the potential for the millions of Americans who gained access to insurance through the ACA to lose that coverage. For now, we are not changing our views on any moats or valuations in the industry, but investors should be aware of the various scenarios that could influence the U.S. healthcare system over the next several weeks.

Importantly, the Supreme Court has a couple of options related to hearing oral arguments on the ACA. First, the court could decide to hear the arguments with only eight justices. In the event of a 4-4 tie, the court could turn the case back to the original district court to decide which parts of the law could be upheld without the individual mandate that is in question. In that case, further appeals of that court's decision-making process could be possible while the ACA remains the law of the land. To avoid such uncertainty related to a potential tie vote, though, the Supreme Court could wait to hear oral arguments until another justice is named to the court, which would lead to a definitive vote.

Despite previous precedent from Republican leadership in the Senate that delayed voting on an Obama nominee in 2016 because it was an election year, President Trump and Senate leadership appear intent on voting on a new justice before the end of the year. If that is the case, there is a chance that a 5-4 vote upholding the ACA could turn to a 5-4 vote against the law, assuming the new justice votes in line with most of the other conservative jurists.

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