JP Morgan: Chief Justice Roberts Saves the ACA

JP Morgan on today's Supreme Court decision: "Despite a growing consensus that the individual mandate would be declared unconstitutional, the Supreme Court has decided to uphold the individual mandate, leaving in place the entire Affordable Care Act (ACA) including the Medicaid expansion, although there now appears to be limits as to the federal government's ability to force state expansion. For the broader industry, we view this decision as largely status quo as all of the key reform provisions will remain intact while plans will continue to implement the ACA as written. That said, uncertainty will remain until the November elections given Republican assurance of a push to “repeal and replace” the ACA, leaving positive optionality for MCOs into elections." JP Morgan goes on to say, "For Medicaid, court rules that states can opt out of expansion without losing current federal funds – adds some uncertainty, but we see this as unlikely. While it is likely that at least some of the most dogmatic Republican states will consider opting out despite the fact that the federal government is picking up 100% of costs through 2016 and 90% beyond, we still see the ruling as an overall positive for AGP/CNC/MOH and reiterate our Overweight ratings on AGP and CNC." JP Morgan views this decision as "status quo" for the Managed Care sector and believes reform implementation will continue as planned.