With a relatively light economic calendar this week, the President’s Obamacare replacement bill (the American Health Care Act if you want to use its formal name, Trumpcare if you don’t) takes center stage as the House is tentatively scheduled to vote on it on Thursday. The vote could literally go either way which means healthcare stocks could be in for a volatile week in one direction or the other.
If the CBO’s projection comes true that 24 million more Americans becoming uninsured by 2026 if the bill passes, healthcare companies will be deeply impacted. Insurers will no doubt be affected as fewer people covered would mean lower premium revenue. That’s not even to mention the fact that premiums could be driven further down if price competition increases, a Trump selling point during the campaign. I think though that the hospitals and other healthcare facilities operators, in particular, could be most affected if the bill passes.
The SPDR S&P Health Care Services ETF (XHS) portfolio is broken into four categories…
The argument as to why the hospitals could be most affected is fairly straightforward. If millions of individuals lose their healthcare coverage, they’ll probably be less likely to seek out medical help. The ones that do show up may have less ability to pay their bills. The hit to hospital companies could be substantial if, as the CBO projects, the new bill disproportionately affects lower income people. Most hospital stocks were down several percent on the day that the bill was announced.
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