On Tuesday, the Trump administration provided its formal backing to a draft bill introduced by House Republicans which aims to repeal and replace the Obamacare healthcare law. Such an action comes as no surprise since Trump has always been an outspoken critic of the Affordable Care Act. Healthcare stocks declined on Monday after the GOP unveiled its new healthcare proposal with the iShares U.S. Healthcare ETF (IYH) losing 1%.
But a careful examination of individual gainers and losers following the announcement tells a more complex story. The new healthcare legislation has its own sets of winners and losers and the sector as a whole continues to remain strong. This means that it’s a good idea to pick those stocks which are poised to gain from the new healthcare law.
Enter ‘Obamacare Lite’
The Republican proposal, also called The American Healthcare Act (AHA) proposes to ring in radical changes, such as eliminating the taxes mandated under Obamacare. At the same time, it seeks to retain some of the existing legislation’s more popular provisions.
In a sense, the new legislation retains the essential framework of the Affordable Care Act, which is why it is at times being referred to as “Obamacare Lite.” At the same time, it is short on details, since the costs accrued to the government under the new law remains unknown. Additionally, the number of people likely to feel the impact of the legislation also remains unclear.
The new legislation proposes to replace the mandatory requirement to purchase insurance with a system of penalties to be imposed by insurers. Also, subsidies are to be replaced with tax credits which are refundable. Further, all taxes levied under Obamacare will be abolished. Under the new law, states will have greater responsibility. However, insurers will still have to provide cover to individuals regardless of any preexisting conditions.
Possible Losers
Following the unveiling of the new law, hospital companies Community Health Systems, Inc. CYH and Tenet Healthcare Corp. THC lost 2% and 3% on Tuesday. Under the ACA, the sector began to get paid for several services which they would earlier have to provide free of charge. However, under the new law, several individuals would lose their healthcare coverage. This means that hospitals would again have to face a scenario where they wouldn’t get paid for several services.
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