Insurance stocks tumbled after Trump’s Obamacare announcement

October 13, 2017, 12:02am

The full effect of President Donald Trump’s latest moves to dismantle parts of Obamacare may not be felt by patients for a little while yet. But they immediately hammered shares of insurers, whose participation on America’s healthcare exchanges is likely to be curtailed in the months ahead.

Markets responded Friday to two big moves by Trump via executive order. On Thursday night, he abruptly halted federal subsidy payments to insurers to help cover care for lower-income customers. He also loosened federal regulations to allow sale of cheaper, but less comprehensive, health plans under the Obamacare system.


More than 7 million people are currently covered under federally subsidized policies, which cost the government about $7 billion a year, according to the Washington Post. Without the federal payments, those consumers could lose coverage and insurance companies may flee insurance exchanges in the months ahead as the cost of offering policies for poorer customers becomes prohibitive.

Worries about such a scenario hit shares of St. Louis-based insurer Centene, which tumbled 3 percent in Friday afternoon action.

The company announced plans in June to expand its Obamacare exchanges to nine state exchanges, up from six, bucking the recent industry trend toward backing out of local Obamacare markets.

Centene is in the midst of a $3.8 billion acquisition of New York-based Fidelis the latest in that multi-state push into the Obamacare exchange market.

After that deal closes, roughly 8 percent of its revenue will be tied to the state-exchange business, according to Morgan Stanley analysts.

At its low on Friday, Centene’s stock was lower by about 8 percent. But it recovered some of its losses after a Morgan Stanley analyst issued a report maintaining his upbeat view on the stock.

Other key details:

  • In addition to Centene, other insurer stocks registered smaller declines on Friday. Molina Healthcare was down almost 3 percent. Anthem fell more than 2 percent. And Aetna was down 1 percent.
  • The attorneys general of New York and California immediately threatened to sue the president to maintain subsidies. Such litigation could delay implementation of his new executive orders.
  • Trump’s executive action comes on the heels of two failed attempts to replace Obamacare in Congress. Although Republican members have repeatedly vowed to undo Obamacare through legislation since it was passed in 2010, many are now privately giving up hope on such action, Politico reported.