Obamacare Ruling Hits Health Care Stocks

A federal judge’s decision to strike down the entire Affordable Care Act late Friday has hit the stocks of health insurers and hospitals.

Shares of Molina Healthcare, which specializes in providing care to low-income people under Medicaid and is a mainstay of the individual insurance markets created by the law, fell almost 9 percent on Monday. The stock of Centene, which had expanded aggressively into the state marketplaces, dropped nearly 5 percent.

Other health insurers — Anthem, UnitedHealth and Cigna — were down at least 2.6 percent.

An end to the health law, commonly called Obamacare, could also ding the bottom lines of hospitals, which could treat fewer patients and face more unpaid bills. Shares of HCA, the nation’s largest profit-making hospital chain, were down nearly 3 percent. Two hospital operators were particularly hard-hit. Community Health Systems shares slid almost 14 percent, and stock in Tenet Healthcare was down nearly 7 percent.

The declines on Monday followed a slide in health stocks last Friday, which was set off by a Reuters report that Johnson & Johnson had kept the presence of asbestos in its baby powder from regulators and consumers.

[Read more: In hundreds of pages of memos, The New York Times learned that executives worried about a potential government ban of talc, the safety of the product and a public backlash over Johnson’s Baby Powder, a brand built on a reputation for trustworthiness and health.]

The judge who ruled on the legality of the Affordable Care Act did not issue an injunction to stop federal officials from enforcing the law, so it was not immediately nullified and existing coverage has not been affected. Democrats promised to appeal the decision, which seems destined for the Supreme Court.

Still, the ruling added uncertainty to the health care sector, parts of which have done very well under the law. Since the law’s passage in 2010, shares of health insurers had soared, easily outperforming the broader market. Anthem, UnitedHealth, Cigna, Centene and Molina were all up between 300 percent and 750 percent in that time. By comparison, the S&P 500 has gained about 100 percent over that period.