The Market Impact of the Supreme Court Decision Regarding the Patient Protection and Affordable Care Act: Evidence from the Health Insurance Industry

This study examines the stock market reaction to the June 28, 2012 Supreme Court decision to uphold the individual mandate and other features of the Patient Protection and Affordable Care Act. Given the conservative majority of the Court at the time, this ruling came as a surprise to most observers. We find evidence of a negative stock market response for health insurers and a positive stock market response for Medicare and Medicaid service providers (on the announcement day). We further analyze the stock return trends over the litigation period and identify a structural break in return patterns for health insurers during the period surrounding the Supreme Court ruling, but no such structural break during the same period for Medicare and Medicaid service providers.