NEW YORK, March 21 Fitch Ratings believes the
U.S. Supreme Court's pending decision on the constitutionality
of the Patient Protection and Affordable Care Act (ACA) could
have some implications for the healthcare sector. However, we do
not expect the outcome to affect the outlooks or ratings of our
rated corporate healthcare issuers.
Several matters are scheduled for discussion, but the focus
of the challenge is the individual mandate under which every
U.S. citizen would be required to purchase health insurance -
meaning an unprecedented mandatory U.S. consumer purchase and
the heart of the constitutionality debate. We believe the
mandate is necessary in order for the ACA to at least partially
share risk and avoid adverse selection. If squashed, we feel
that the law's viability could be meaningfully affected.
Uncertainty surrounding timing and implementation of the law
are still evident, and we believe industry stakeholders are
therefore allowing for meaningful variance in their strategic
and operational processes. U.S. justices will begin hearing
arguments beginning March 26.
If the ruling disaffirms select provisions of the law, we
would need to review those changes within the context of how the
entire law would then function and potentially affect the credit
profiles of the various industry participants. We also believe
some action via Congress might also be necessary, particularly
if the court determines the individual mandate is
However, if the court rules that the ACA in its entirety is
constitutional, we would maintain our original view that volume
increases will be somewhat offset by margin declines. We still
anticipate that costs on the front end of the implementation
timeline would pressure margins in advance of a one-time step-up
in volume beginning in 2014, when roughly 32 million new
patients would receive healthcare insurance coverage.
Essentially, a canceling out would occur having no effect on
credit profiles. Contrarily, if the entire law is negated,
margins would likely remain stable with no step-up in volume and
the status quo would generally be preserved.