By Emma Court
The Trump administration’s announcement that it will stop paying cost-sharing reduction payments to health insurers, a major part of the Affordable Care Act, sent shares of health insurers and hospitals plummeting Friday.
As is his style, the president made the announcement in a tweet:
In brief remarks to reporters at the White House Friday, Trump said insurers have made a fortune and that CSR payments go to them “to lift up their stock price.” He added, “That’s not what I’m about.”
Health insurers that still have a presence on the ACA exchanges were the hardest hit in Friday trade. Those insurers are expected “to have immediate losses, some of potentially large magnitude, and a rapid exit of plans from marketplaces,” said Mizuho analyst Sheryl Skolnick.
In addition, “hospitals should see rising bad debt in 2018 as these co-pays/deductibles go unfunded, in our view... we would expect rising numbers of no pay heads in hospital beds,” she said.
Centene Corp. /zigman2/quotes/208900023/composite CNC +0.87% shares, which has turned a significant ACA profit and planned to expand its presence, dropped as much as 8.8% Friday morning, evening out to a 3% decline in the afternoon. Molina Healthcare Inc. /zigman2/quotes/205492029/composite MOH -1.55% , which has also reported ACA profits, declined 3.4% in afternoon trade. Stock in Anthem Inc. /zigman2/quotes/203808743/composite ANTM -0.24% , one of the few large health insurers that hasn’t exited the exchanges, dropped 2.6%.
Other health insurer shares were also down in Friday trade, even those who have exited ACA exchanges or, like WellCare Health Plans Inc. /zigman2/quotes/207459018/composite WCG +1.35% , which never participated and yet had a stock decline of as much as 2.5%. UnitedHealth Group Inc. /zigman2/quotes/210453738/composite UNH -0.50% stock declined 0.5%, Aetna Inc. stock dropped 1.1% and Humana Inc. /zigman2/quotes/203095337/composite HUM -0.39% shares declined 1.8%.
Shares of hospital companies, which benefited from the ACA’s expansion of health insurance coverage, declined sharply on Friday. Tenet Healthcare Corp. /zigman2/quotes/207964487/composite THC +3.01% stock dropped 4.8%, Community Health Systems Inc. /zigman2/quotes/203657360/composite CYH -3.25% shares dropped 3.7%, HCA Healthcare Inc. /zigman2/quotes/205934574/composite HCA -0.63% stock declined 0.5%, Universal Health Services Inc. /zigman2/quotes/208539347/composite UHS +0.44% shares declined 0.5%, Quorum Health Corp. shares dropped 5.9% and LifePoint Health Inc. shares declined 0.1%.
President Donald Trump also signed an executive order expected to undermine the ACA and benefit companies offering short-term health policies on Thursday. Those companies include Health Insurance Innovations Inc. , which had a 3% share rise on Friday, and UnitedHealth Group.
Trump has previously threatened to end CSR payments, which are made to health insurers to pay for the increased cost of certain ACA plans and amount to billions of dollars. Although the announcement has a tone of finality this time, there are reports that the president could continue the payments if a bipartisan deal is reached.
In August, a report from the non-partisan Congressional Budget Office found that ending CSR payments would increase federal deficits and gross premiums for certain ACA plans, and would translate to no ACA plans available to about 5% of people next year.
Health Care Select Sector SPDR /zigman2/quotes/205918244/composite XLV -0.33% shares declined 0.2% in Friday trade. Shares have risen 3.6% over the last three months, compared with a 4.4% rise in the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.84% .