Romney win would be boon for insurers, bust for hospital-related stocks
There will be winners and losers in the health care space regardless of how the U.S. Supreme Court rules on President Barack Obama's health care reform law, according to Jacob Gottlieb, founder and chief investment officer of the hedge fund firm Visium Asset Management LP.
Speaking Thursday in Raleigh, N.C., at a private gathering of advisers hosted by Hatteras Funds, Mr. Gottlieb said that if the law is struck down, “that would be great for health insurers because they might be able to take up profitability by 15% to 20%.”
Health insurers are hurt by the legislation, he explained, because profits are capped under the law.
Assuming that the high court does not rule against the president's signature legislation, Mr. Gottlieb said investors should look for a bump up by hospital-related stocks.
“Hospitals have high fixed costs, and having 30 million new [insured] people coming into the system is good for hospital business,” he said.
Mr. Gottlieb also cited the upcoming presidential election as potentially significant with regard to the health care law.
“If Romney wins the election, the first thing he does is repeal Obamacare,” he said. “I don't think Obama is going to repeal Obamacare.”
Mr. Gottlieb, who assigned analysts to attend the Supreme Court arguments on the health care law, said the law is vulnerable because of the way it was written without a severability provision.
Most contracts, he explained, include a severability clause that keeps the contract intact if parts are removed.
If the Supreme Court rules against the individual mandate requiring everyone to buy health insurance, the law itself likely will be struck down, Mr. Gottlieb said.
“In the case of Obamacare, they elected to not put severability in, which would have maintained the contract even if something was taken out,” he noted.
