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After Obamacare, How Will TrumpCare Treat Insurers?

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Now that the presidency of Donald Trump is certain, Obamacare is shrouded in uncertainty. In any case, Trump’s intention of repealing this law was clear from the very beginning. The Healthcare Reform Act, which was formed in 2010 by Barack Obama faced constant friction since its inception. This time, it is being opposed by the President-elect himself.

The sense of urgency to replace the law was evident in Trump’s comment in the final week of his campaign. He had declared, “We will do it, and we will do it very, very quickly. It is a catastrophe.”

Trump proposed to repeal and replace Obamacare with Health Savings Accounts (HSAs) and a series of offers encouraging free-market competition. These include encouraging the sale of insurance policies across state lines, and making individual health insurance premium payments fully tax deductible.

Trump is however, favoring one key mandate of the law which prohibits insurers from refusing coverage to people with preexisting medical problems or from over charging them. Though some of the changes proposed by Trump will encourage healthy competition among health insurers, the proposal to cover patients with a preexisting condition will be a major hurdle.

Insurers have already said that covering preexisting diseases turns out costly for them unless healthy patients enroll en masse to offset the cost of insuring the sick population, which can only be achieved by an individual mandate, a feature of Healthcare Reform the Trump wants to undo.

Reaction of Insurers

Stocks of the insurers had a mixed reaction to the outcome. While insurer Aetna Inc. (AET - Free Report) and Humana Inc. (HUM - Free Report) gained on hopes that the new governance will help them through the merger, other players such as Cigna Corp. (CI - Free Report) UnitedHealth Group Inc. (UNH - Free Report) carrying a Zacks Rank # 2 (Buy), Centene Corp. (CNC - Free Report) and Molina Healthcare Inc. (MOH - Free Report) suffered. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medical - HMOs Industry Price Index

Medical - HMOs Industry Price Index

Will a Repeal Be Easy?

Modifying Obamacare will bring its own set of woes. It is likely to raise the number of Americans without insurance by 24 million and increase the deficit by $353 billion over 10 years, according to a report by the Congressional Budget Office.

How Did Insurers Fare Under Obamacare?

Obamacare was one of the most sweeping changes experienced by the health care industry. Its numerous provisions put a bridle on the players and changed the face of the industry. After opposing vehemently to the law initially, the players somehow embraced it. This resulted in significant modifications to their business that included new product launches, geographical diversification, growing ancilliary business, and resorting to mergers and acquisitions.

These business changes led to additional cost of investment. This was offset by an increase in revenues that came on the back of membership growth as a result of individual mandate, which forced the uninsured to get insurance cover.

Now, after sharing space with Obamacare for six years, insurers will have to start afresh to comply with the sea change that TrumpCare will bring. We wait to see, how they fare under the changed regulation.

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