Supreme Court Hears Obamacare Arguments

On Tuesday, the Supreme Court heard arguments about the Constitutionality of the "2010 Patient Protection and Affordable Care Act," also known as Obamacare. The law is being challenged by 26 states on grounds that Congress is overstepping its bounds in attempting to apply its power to regulate interstate commerce in justifying the mandate. Specifically, the states are arguing that the government does not have the power to compel Americans to either purchase health insurance or pay a penalty. Conservative justices came out firing at U.S. Solicitor General Donald Verrilli Jr., who was representing the government. “So if I'm in any market at all, my failure to purchase subjects me to regulation?” Justice Antonin Scalia asked. Even liberal-leaning Justice Anthony Kennedy suggested that Obamacare invoked a power "beyond what our cases allow" the Congress to wield in regulating interstate commerce, according to the Washington Post. The tone of today's arguments has led many in the media to speculate that the law is under severe threat. Some Wall Street healthcare analysts, however, have argued that there is a good chance that Obamacare will be upheld. Recently, Goldman Sachs analyst Matthew Borsch predicted a "neutral-to-positive" reaction from healthcare stocks if the Court decides in favor of the government. Although a decision is not expected in the case until June, healthcare stocks could be effected by the ebb and flow of the arguments presented to the court. On Tuesday, sentiment has turned slightly negative as a number of prominent healthcare stocks are trading lower in the wake of today's arguments. UnitedHealth Group UNH has lost 0.25% and was trading at $54.96 while Aetna AET shares were down 0.94% to $46.56. Other notable names include Humana HUM and Cigna CI, both of which were modestly lower at last check. Analysts believe that if the law is upheld it could provide a boost to hospital stocks such as HCA Holdings HCA and Tenet Healthcare THC. Both of those stocks are down on Tuesday, with HCA losing 3% and THC trading 2% lower on the session. According to an article at valuewalk.com, Medicaid insurers such as Molina Healthcare MOH and Centene Corp. CNC could benefit from a decision in favor of Obamacare. Both of those stock are also down on Tuesday, with MOH registering a very small loss and CNC losing roughly 2% to $46.92. Currently, it is too early to tell who has the upper hand in the critical Supreme Court case, but healthcare stocks are likely to see increased activity leading up to the June decision. In the coming months, traders may want to keep the names listed above on their watch lists as well as the SPDR Healthcare ETF XLV.