Health Care Games: The Odds Are Not In Obamacare's Favor

PHOTO: Intrade graph
Share
Copy

As pundits across America weigh the political odds of the Supreme Court's health care decision, stock traders around the globe are wagering on the controversial law's fate.

The odds of a key component of the Affordable Care Act surviving the court ruling, set to be issued Thurday, are slim if the betting money is any indication.

According to the Ireland-based market Intrade, where nearly 600 people have bought what amounts to futures stocks on the outcome of the court case, the cornerstone of the president's health care law - the individual mandate requiring all Americans to buy health insurance - has a 76 percent chance of being deemed unconstitutional.

The 595 traders, most of which are American, have collectively wagered about $210,000 on the court decision so far, a tiny fraction of the nearly $30 million traders have gambled on the outcome of the U.S. presidential election. But if the market's history is any indication, it's highly likely their health care prediction will prove to be spot on when the Supreme Court hands down its decision.

"We've got a pretty good track record of predicting things," Intrade operations manager Carl Wolfenden told ABC News. In the 2004 presidential election, Intrade traders correctly predicted the election results in all 50 states. In 2008, traders were correct in all but two states.

But predicting what a small group of people deliberating behind closed doors will decide is much harder to forecast than a national election, where polling, economic indicators and momentum all factor into betting decisions, said Koleman Strumpf, professor of business economics at the University of Kansas School of Business, who studies political stock markets.

"I'm a little skeptical of how good of a job it will do as predictor," Strumpf said of the Intrade market.

But with so few clues as to how the court will rule, Strumpf said the market "might be the best predictor" available.

Since the Intrade market on the health care case's outcome opened last March, the likelihood that the individual mandate would be struck down has skyrocketed.

When the Supreme Court announced it would hear the decision in December, the Intrade market was fairly certain it would be upheld, putting its chances of failure at a mere 45 percent. But when the court heard oral arguments on the case in late March, the stock price shot up to almost 65 percent.

Throughout the past three months of court deliberations the probability that the mandate will be overturned has steadily increased, reaching a peak of 78 percent on Sunday.

Intrade is the only political stock market ABC News could find that was taking bets on the Supreme Court's decision, but other political gambling sites, such as the London-based Ladbrokes, were still keeping a close eye on the court's decision.

Ladbrokes spokesman Alex Bonohue said the site has taken "millions of pounds" worth of bets, primarily from people in the U.K., on who will win the U.S. presidential election. And how the court rules on health care will impact the odds on those presidential race bets, Bonohue said.

But because Ladbrokes caters almost entirely to Europeans, the Supreme Court ruling is not nearly as big of a factor in that market as it is for the primarily American Intrade, said Mike Smithson, a former BBC journalist and founder of PoliticalBetting.com.

"Being blunt, I think that most Europeans think the U.S. is absolutely mad that it doesn't have a public health care system," Smithson said. "There is a complete lack of appreciation for why it should be so politically contentious… We just can't comprehend the opposition."

Betting on whether President Obama or Mitt Romney will prevail in the presidential election, on the other hand, is "extraordinarily big business" in the U.K., Smithson said.

Brits have already wagered about $10 million on the U.S. election, and he said that number will certainly go up as November draws nearer.

Wolfenden said Intrade market for the U.S. election far exceeds the demand for trading on European elections in large part because politics is so divisive in America.

"In the US it's almost a blood sport at times," Wolfenden said. "Over here in Europe we're not really that interested in politics, but everyone has such a strong opinion in the U.S. it's a good opportunity for people to really put their money where their mouth is."

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...