Home > Uncategorized > 2012/06/28: Quick Post: Not a bit of Rip, just Dip, as SCOTUS holds up Obamacare

2012/06/28: Quick Post: Not a bit of Rip, just Dip, as SCOTUS holds up Obamacare

© 2012 ROHR International, Inc. All International rights reserved.

Breathtaking. That’s the only term we can possibly use to describe the US Supreme Court (SCOTUS) upholding  almost all of the Affordable Healthcare Act, known in the vernacular as ‘Obamacare’. That was based on a taxation issue instead of addressing whether it is legal under the US Commerce Clause. This is a personal budget and US federal budget Black Hole in motion (more on that below.) So the equities have decided there is no basis for a Rip (short term rally), just ample reason for a further Dip considering there is likely to be more bad news from Europe as well.

And if you think the Republican Right was motivated on this fall’s election prior to this moment, just wait until you see what happens next. And the verdict from the equity market is that this is a bad idea…


…and rightfully so in light of what is likely to happen next to both personal and federal government budgets. Without getting into all of the minutia of the functions behind the implementation of the health care law, it is likely that very many small- and medium-sized businesses and even quite a few large ones are going to drop their employee health plans.

That is because the other stipulations of the law (most pointedly no insurance company discrimination against providing coverage to those with pre-existing medical conditions) mean health insurance rates that have already gone up markedly are more than likely to accelerate further. Therefore, as much as most employers would like to provide a ‘group’ rate to their employees, company insurance plan costs are going to become exorbitant. Why do you think the insurance companies have been so accommodative to what was originally deemed an unworkable plan?

The ability to hike coverage premiums to even more profitable levels than prior to the new mandates!! Yet this has a less than subtle delimiter on their ability to profit, or even remain in business for that matter. As companies drop their employee health insurance plans, individuals are required to purchase insurance for themselves. As they are no longer members of an even modest-sized group, that is likely to prove quite expensive; more expensive than most employees are going to want to pay, or in many cases can even possibly afford.

At that point they are likely to apply for membership in one of the government organized ‘groups’ that were included in the plan as a way to help individual purchasers of health insurance afford reasonably good health care. The problem is that the amount budgeted for those groups, and budgetary assumptions about their cost to the federal government, is in no way likely to be adequate. So for the near-term you will have much more personal disposable income needing to be allocated to personal health care insurance, which may well be a drag on the economy.

And in the intermediate-to-longer term there will be significant additional costs to a federal government already running massive deficits to assist with the coverage of individuals dropped from current employee health care plans. And that does not even begin to address the money that was reallocated out of the already stressed Medicare program to make the calculus behind Obamacare look reasonable. As that includes lower payments to health care providers, it may even lead to significant rationing of care as doctors and hospitals opt out of offering services to those with Medicare coverage.

Have no doubt about it, this is a real mess. The only question is how long will it take the equities to wake up to the implications?


General Market Observations and EXTENDED TREND IMPLICATIONS remain the same as our earlier post this morning.

Thanks for your interest.

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