Supreme Court Decision on Healthcare Could Rouse Market, Drive Deals —Private Equity International

Uncertainty Surrounding the Court’s Pending Decision Causes Transaction Delay 

Private Equity International’s Graham Winfrey reports that whatever way the Supreme Court rules on healthcare may end up driving more industry activity.  

Uncertainty surrounding the court’s pending decision has caused some potential sellers of healthcare businesses to delay transacting. A ruling one way or the other should help remove uncertainty that has stifled activity in recent weeks.

The decision should come as a relief to healthcare investors: a total of 20 deals worth a combined $997 million have transacted so far this year, compared to 40 deals worth $4.4 billion during the first six months of 2011, according to Dealogic. Overall private equity investment in the US, meanwhile, has remained stable year-over-year, with 296 deals worth $40.3 billion transacting so far this year compared to 334 deals worth $43 billion during the first six months of 2011.

“The sense I get is that nobody wants to definitively commit between now and the decision,” Joel Greenberg, senior corporate partner at law firm Kaye Scholer toldPrivate Equity International.

 

It’s Quite a Big Bill

 

The Journal of Accountancy reports on how different possible rulings might play out,  the latest estimates of the bill’s costs, and how companies have responded so far:

About 20% of businesses were offering family coverage that enrolled adult dependents on their parents’ plans about a year after that provision took effect, research by the Kaiser Family Foundation showed. Seventy percent of companies with 200 or more employees offered the expanded coverage, but only 19% of companies with fewer than 200 employees did.

Employers also accelerated efforts to reduce health benefit costs, Mercer research found. Many large employers shifted towards high-deductible, account-based consumer-directed plans and wellness programs that alert employees to health risks, which contributed to a 6.1% rise in overall health benefit costs in 2011, down from 6.9% a year earlier, Mercer reported. Mercer projected health benefit costs would increase 5.7% in 2012.

A big question has long been whether companies will drop health insurance coverage, if the court upholds controversial provisions such as guaranteed issue and community rating, or upholds the act in its entirety.

Mercer found that larger employers would be more likely to continue to offer health insurance coverage to their employees if the PPACA stays intact. Only 6% of companies with 500 or more employees planned to drop their health plans once state-run health insurance exchanges come online in 2014. Among smaller companies, about 20% said they would drop their health plans.

A study by business consultant McKinsey & Co., which didn’t differentiate by size of workforce, projected a much higher overall dropout rate of 30%.

The decision will come Thursday, reports The Wall Street Journal.