Trump’s Win Leaves Health Insurers With Questions

Hospital and insurance companies that have benefited from the Affordable Care Act’s expansion of Medicaid coverage saw a sharp fall in their stock prices on fears a Trump administration could roll back that expansion.

President-elect Donald Trump has pledged to “repeal and replace” the Affordable Care Act, which extended publicly subsidized health insurance to millions through the expansion of Medicaid and through state exchanges for private insurance.

Hospitals and some insurers benefited from an influx of newly insured patients under the law. Hospitals saw patient volume growth and fewer unpaid bills.

Shares of HCA Holdings Inc., the nation’s largest hospital company, were down 12% Wednesday afternoon from the prior day’s close. Tenet Healthcare Corp. was down 23%. Troubled hospital operator Community Health Systems Inc. was down more than 20%.Universal Health Services Inc., which operates acute-care and behavioral health hospitals, was down about 6.2%.

Shares in Molina Healthcare Inc., a large insurer of Medicaid patients, fell more than 14%.

Molina Chief Executive J. Mario Molina said he is optimistic that the Trump administration will actually expand Medicaid further, with a large role for managed-care companies. Republicans will be looking to cut costs without making the unpopular move of yanking coverage away from people, he said, and Republican governors may be more open to expanding Medicaid with the greater freedom that a Trump administration might grant them.

“Health-care reform is in place, it is going to be modified, it’s going to move forward,” he said. “We’re going to see Obamacare 2.0, maybe they will call it Trumpcare, or Ryancare.” He suggested that the law’s exchanges might also survive but change—perhaps with reduced subsidies and more flexibility for insurers.

Some analysts downgraded HCA, on the risk that Medicaid expansion would be reversed and uncertainty about what an alternative may be. “We have no idea what will replace it,” said Sheryl Skolnick, an analyst with Mizuho Securities USA, who downgraded the company to neutral from buy. RBC Capital Markets analyst Frank Morgan wrote on Wednesday it is “not clear at all” how the incoming president would replace a law that extended insurance to millions.

In a statement, HCA said the company has “a long history of working with America’s leaders in Washington and across the nation to ensure access to quality health care for as many people as possible, and we will continue to do that.”

Many analysts think it is unlikely all of the ACA’s effects would be truly undone, but believe the lack of clarity will likely pressure the industry. “A Trump victory just increases uncertainty, which the market doesn’t like,” said Thomas Carroll, an analyst with Stifel Financial Corp.

The near-term “impact and shock of the result will weigh on stocks across our coverage until we get greater clarity on agenda and details” around Mr. Trump’s health-care policies, wrote Ralph Giacobbe, a Citi analyst. Writes analyst Ana Gupte of Leerink, “The unthinkable has happened.”

Though Mr. Trump has committed to repeal the health law, he has been vague about how he would do so and what would replace it. Like other Republicans, he has endorsed policy ideas including selling health plans across state lines and increasing use of health-savings accounts.

In a statement, the American Hospital Association said the hospitals that make up its membership are “a trusted source of information for legislators on the complex issues related to health care.” It said the trade group looks forward to working with the Trump administration and Congress.

In a statement, America’s Health Insurance Plans, the main lobbying group for the industry, said it would “work across the aisle—with every policy maker and the new administration—to find solutions that deliver affordable coverage and high-quality care for everyone.”

The insurance industry’s experience with the ACA has been a mixed bag, with upsides and downsides. If Mr. Trump somehow did away with the law’s expansion of Medicaid, insurers could lose new enrollees they have gained and the prospect of further growth in that business from states that hadn’t yet expanded their programs.

Hospitals, too, won and lost under the law. The primary gain came from fewer uninsured patients. The law also introduced changes to how Medicare and Medicaid pay hospitals, doctors, nursing homes and other providers. Medicare offered new incentives for hospitals to meet goals for quality and cost under the ACA, some of which are mandatory. Results of the initiatives have been mixed.

The law also cut hospital Medicare payment rates and other funding to offset the costs of treating the uninsured. An outright repeal of the law would erase those cuts, which markets perhaps underappreciate, said Chris Rigg, an analyst with Susquehanna Financial Group.

Chas Roades, chief research officer of the Advisory Board Co., a consulting firm, said he thinks it is unlikely these funding cuts will be restored. Whether Congress repeals the Affordable Care Act or starves it through the budget reconciliation process, providers “could be left with all of the downsides and none of the upsides of Obamacare,” Mr. Roades said, because ending the payment cuts in the legislation would leave too big of a budget gap, while the payment incentives could be sharply curtailed.

Trump’s own goals and plans are unclear. “No one saw this coming—they don’t really have a health policy team, as far as we can tell. It’s not clear how much daylight there is between what Trump will do and what the Ryan plan focuses on,” said Mr. Roades.

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