The stakes are high in the Supreme Court’s consideration of the 2010 health law, as countless commentators聽have observed. In some circles, however, the gambling metaphor has been pushed to its logical conclusion.
Illustration by Svadilfari vi Flickr
Bernstein Research stock analyst聽Ana Gupte laid 50 percent odds recently聽on聽chances that the court will strike down the Affordable聽Care Act’s聽individual mandate along with strict coverage requirements. Over at , a “prediction market” for current events, the betting Tuesday morning gave聽chances of about 58 percent聽that聽the court will disallow the mandate, which requires people to obtain health coverage or pay a 聽fine.
On the Web site, 54 percent of an audience聽composed largely of law students and clerks predicted the mandate will be thrown out.
Declaring聽Vegas-style odds on court rulings聽isn’t the norm for Wall Street analysts such as Gupte. But the Supreme Court decision, expected to be announced at the end of June, is critical聽for the health-insurance stocks she聽covers. She聽puts low probabilities — 15 percent in each case — on聽chances that the court will uphold the entire law or strike the whole thing down.
Predictions about the act’s聽ability to survive whole grew more聽pessimistic聽after March’s聽oral arguments from lawyers on each side.聽Many analysts believed questions from聽key justices such as Anthony Kennedy and Chief Justice John Roberts betrayed an inclination against the mandate.
At Intrade, bettors raised the odds聽of the mandate being ruled unconstitutional聽from less than 40 percent before the arguments to more than 60 percent聽afterwards.聽In recent days, however, they’ve聽backed off.聽Intrade聽deals pay off at $10, and at聽this morning’s聽prices you聽could聽buy a contract on a negative聽Supreme Court decision for聽the mandate for聽$5.76.聽Buying a chance to win $10 for $5.76聽amounts to laying聽58 percent odds on your bet.
At FantasySCOTUS no money changes hands. Winners聽get “bragging rights,” said Corey Carpenter, director of analysis for the Harlan Institute, an educational nonprofit affiliated with the site.聽Predictions on FantasySCOTUS of the mandate’s demise saw聽little聽increase聽following the arguments, perhaps because the site’s聽audience pays聽more attention to聽legal logic than media聽coverage, Carpenter said.
The biggest bets on the Supreme Court decision come聽in聽the stock market. Insurance companies gained billions of dollars in market value聽after the oral arguments on expectations of a favorable outcome for the industry.聽But their prices have drifted back down.
Insurers worry that the court could block the mandate but uphold a separate requirement that they accept all members at a uniform price regardless of pre-existing illnesses. Such an outcome would deprive the聽companies of billions in new revenue while at the same time assigning them expensive liabilities.
After analyzing the oral arguments, however, Gupte said there’s a聽50 percent chance that the聽court will toss the coverage requirements and the mandate at the same time. That’s the聽“most likely” outcome and would聽raise insurer profits by 7 percent on average, she wrote. Partly as a result, she’s bullish on several insurer stocks, including聽UnitedHealth Group, Cigna and Aetna.
Not聽all聽oddsmakers believed the oral arguments聽occasioned聽a new betting line. Andrew Cohen, a CBS News聽legal analyst and聽contributing editor for The Atlantic,聽promised to update his odds, set last fall on The Atlantic’s site, on how individual justices would vote.
“Having picked [the]聽wrong horse in last five Kentucky Derbys,” he told KHN聽via, “I decided not to chance it.”
