Market Test for the Importance of the Individual Mandate

The U.S. Supreme Court is set to rule soon on the constitutionality of the individual mandate for health insurance from the Affordable Care Act.  The act is part of the effort to get everyone on health insurance (including 29% of Texas...that's a really high percentage...how embarrassing for a rich state).  The individual mandate is a pro-health insurance provision that encourages all people to basically pay into the health insurance system so that the system can insurance more sickly people without too much of a hit to profit margins.  Those who do not have health insurance have to pay a small tax penalty.

How will you know if the individual mandate is important to health insurance companies?

Look at the performance of WellPoint (WLP), Coventry Health Care (CVH), UnitedHealth Group (UNH), Aetna (AET), CIGNA (CI) and Health Net (HNT) in relation to the S&P 500 when the Supreme Court ruling gets publicized. 


This is a big deal.  If the Supreme Court strikes down this provisions, look for health insurance company stocks to plummet relative to the market's performance.  This will be a good market test to see how vital the individual mandate is to the business plan of insurers who now have additional burdens from the Affordable Care Act.

Should the Supreme Court reject the individual mandate, the most talked about backup plan would be automatic enrollment of employees into their employer's health plan.  This is less intrusive to people than the individual mandate and still gets a lot of people to be in insurance companies' risk pool.  This is a sneaky way of getting otherwise healthy people who wouldn't actively buy health insurance to indirectly pay for others who are more sickly.  Don't feel too bad for these people though, businesses and charities use this trick on people all the time with automatic reoccurring payments with your credit card number.  The bottom line is: this is another way to prey upon the ignorant, lazy, or otherwise busy segment of our population (the vast majority of us are a part of this segment).