Insurer Centene Corp. fell the most in almost a year and hospital operators including Tenet Healthcare Corp. dropped after officials in President Donald Trump's administration said they would immediately stop making Affordable Care Act cost-sharing reduction subsidy program payments, a move that could destabilize the market and hurt company earnings, credit ratings and dealmaking.
The announcement is fueling fears that the payments, known as cost-sharing reduction subsidies, really will end immediately, which could hurt hospitals and those insurers still in the marketplace. Fourth-quarter and 2018 earnings for hospitals are "now at risk" and current estimates are probably too high, Mizuho Securities analyst Sheryl Skolnick wrote in a note to clients.
"The effect of the order is likely to be profoundly destabilizing," Skolnick said.
The late-night move by Trump may spur HCA Healthcare Inc., the largest publicly traded hospital operator, to consider going private, she suggested. It may also drive further degeneration of credit quality for already indebted hospital operators such as Tenet, Community Health Systems Inc. and Quorum Health Corp. The subsidies were meant to help insurance companies cover poor patients.
Centene, one of the few remaining health insurers that has pressed forward into the Affordable Care Act marketplace, fell as much as 11% to $83.56 in New York, the biggest slide since November 2016. About 15% of Centene's earnings come from Obamacare markets, Leerink analyst Ana Gupte estimated.
Tenet dropped as much as 12% to $12.25. Community Health Systems fell as much as 11% to $5.32. HCA Healthcare Inc., the largest publicly-traded U.S. hospital operator, slid as much as 4.1% to $71.18
Industry Reacts
While the selloff was under way on Friday, trade groups representing insurance companies, hospital operators and doctors blasted the announcement.
America's Health Insurance Plans and the Blue Cross Blue Shield Association, two main insurance industry trade groups, said in a joint statement that there will be "real consequences" to Americans who rely on the payments to lower costs.
