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Your Guide to the Stock Winners & Losers of Trump's Obamacare Replacement Bill

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Whether you think it’s “Obamacare Lite,” “Obamacare 2.0,” “dead on arrival” like Rand Paul, or you actually like the bill, the American Healthcare Act (AHCA) has certainly made an impact on the entire healthcare industry since its announcement.

What is the AHCA?

The AHCA is the Republican Party’s long-awaited Affordable Care Act replacement, developed by the White House and Senate Republicans. While some of Obamacare’s key features have been scratched—like the tax on people who don’t purchase healthcare—other protections survived, like the ban on discriminating against people with pre-existing conditions and the provision that allows young adults to stay on their parents’ plan until age 26.

The replacement plan maintains Medicaid expansion, but only through January 1, 2020. At this point, expansion will “freeze,” and states will no longer be able to sign new enrollees up for Medicaid; legislators expect enrollees to shift out of the program as their incomes change.

The AHCA also seems to benefit people who are young, healthy, and a high-income earner over those who are older, sicker, and poorer; it would make many changes to what health insurers can charge enrollees who purchase insurance on the individual market, with these changes benefiting those who want cheaper packages but disadvantaging those who need more expensive healthcare.

Congressional Budget Office Analysis

The Congressional Budget Office (CBO) report for the AHCA was likely not the news Republicans wanted to hear. According to the CBO, 14 million additional people would be uninsured next year if the AHCA were enacted, and that number spikes to 24 million by 2026. The report also estimated a $337 billion reduction in the federal budget over 10 years.

The report sees huge changes in Medicaid. By 2026, federal Medicaid spending would be 25% less than under current law, while the number of Medicaid enrollees would be 17% lower, with 14 million fewer people covered by the program. The CBO estimated that the many changes affecting Medicaid would decrease direct spending by $880 billion between 2017 and 2026. In other words, this cut to Medicaid will be how the AHCA will be paid for.

The CBO also laid out a stark projection example of the replacement plan’s age-rated tax credits, and how they affect older Americans. If Obamacare were still in place a decade from now, a 64-year-old earning $26,500—or just less than twice the federal poverty level—would pay $1,700 for premiums in a year. Under the AHCA, a 64-year-old at the same income level would pay $14,600 in premiums for coverage, in addition to higher out-of-pocket costs.

Stock Winners & Losers

Not only are Democrats, and a growing number of moderates and conservatives, criticizing the AHCA, but some of the first to point out its flaws have been groups with a huge presence in the healthcare industry: the American Hospital Association and the American Medical Association.

While some businesses believe the replacement bill will help them relieve some costs, healthcare businesses think it may relieve them of customers. Healthcare is a booming sector, and one of the biggest in the U.S., thanks, in large part, to Obamacare. According to the Centers for Medicare and Medicaid Services, healthcare spending was at $3.2 trillion back in 2015. Our current healthcare law vastly increased the number of people who have health insurance, thus increasing the number of people accessing prescription drugs, in-patient services, and medical devices.

Who are the stock winners and losers so far? And who will be affected if the AHCA is passed?

For hospital stocks like Tenet Healthcare (THC - Free Report) , HCA Holdings (HCA - Free Report) , Universal Health Services (UHS - Free Report) , LifePoint Health , and Community Health Systems (CYH - Free Report) , the AHCA could mean more uninsured patients who are unable to pay their hospital costs, despite the extra funds the replacement bill would provide to hospitals that treat a high share of low-income patients. After the CBO report was released, shares of THC and HCA were down as a result.

Insurers could stand to lose as well, especially those focused on Medicaid like Molina Healthcare (MOH - Free Report) and Centene (CNC - Free Report) . At the time of the CBO report’s release, shares of MOH hit their lowest level since October 2014, while CNC stock sank almost 3%.

But because certain requirements mandated under Obamacare will decline if the AHCA passes, big players in the insurance industry could, in fact, see gains. Anthem ANTM, UnitedHealth Group (UNH - Free Report) , and Humana (HUM - Free Report) , among others, may see a rise in their stock price, though they should be weary of an increase in competition if the trend of selling insurance across state lines catches on.

There’s also the medical device sector to consider, and companies who make these products are likely fans of the replacement bill since Obamacare enacted a 2.3% excise tax on them, the proceeds of which were used to subsidize insurance for individuals from low-income groups. Stocks like Edwards Lifesciences (EW - Free Report) and Boston Scientific Corp. (BSX - Free Report) , as well as Inogen INGN, OraSure Technologies (OSUR - Free Report) , and Cardiovascular Systems CSII, who make everything from heart valve products, pacemakers, and oxygen concentrators to infectious disease tests and minimally invasive catheter systems, all could gain if the AHCA is enacted.

However, these companies could find themselves in the same position as hospital groups. If people end up going to the hospital less because they know they won’t be able to afford the inevitable costs, one can assume that less medical devices will be needed; hospitals will have less income to buy these expensive medical devices. Medical device stocks, then, could see declines rather than gains in this scenario.


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