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Supreme Court's Affordable Care Act Decision Might Prove A Buying Opportunity

Morningstar analysts say that investors should not worry about the court's impending decision.

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Should investors be worried about King v. Burwell, the case in which the Supreme Court could decide to invalidate a major provision of the Affordable Care Act? Probably not. Morningstar's analysts say the court's decision will likely be a nonevent--and might even produce a buying opportunity for long-term investors.

First, what is at stake? King v. Burwell pertains to the federally run exchange on which some individuals have purchased health insurance to meet the ACA's individual mandate. Although many states established their own insurance exchanges, others elected to rely upon the federal government's exchange, HealthCare.gov. At issue in the court case is a phrase in the legislation indicating that subsidies are available to those who bought their insurance on "an Exchange established by the State." The plaintiffs claim that language precludes the payment of subsidies to individuals using the federal exchange. If they prevail, subsidies might at least temporarily be unavailable for individuals in the 37 states using HealthCare.gov.

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Scott Cooley does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.