After seven long years of promising to repeal President Obama’s landmark Affordable Care Act, House Republicans finally think that they have enough votes to pass their replacement bill. Representatives are scheduled to vote on the new American Health Care Act on Thursday following several last-minute changes that convinced key moderates and conservatives to support it.
The House vote will likely come down to the wire, and it’s even more likely that the Senate makes key revisions to the bill, but getting the law out of this chamber of Congress would be a clear political victory for Republican leadership and the Trump administration.
Although some pundits expected the GOP to delay its healthcare reform after the original version of the AHCA was canned, the current iteration of the bill garnered centrist and right-wing support relatively quickly.
The GOP’s new plan would eliminate Obamacare subsidies—which are based on income and cost of coverage in their area—and replace them with refundable tax credits based mainly on age. The credits would be worth around $2,000 for those in their 20s to $4,000 for those in their 60s. Credits for people making more than $75,000 would begin to taper our, while people making more than $215,000 would not be eligible for the credits at all.
The AHCA would also do away with the individual and employer mandates, two staples of Obamacare. The individual mandate requires that people have a health insurance plan or face a tax, and the employer mandate requires companies with more than 50 employees to offer an affordable plan to their full-time workers.
These mandates would be replaced by continuous coverage requirements, which levy surcharges on the premiums of those who let their coverage lapse for a certain amount of time. An amendment to the bill now allows states to seek waivers that would replace these requirements with one that allows insurance companies to charge people who had a coverage lapse based on their health.
Critics of the new law claim that the state waiver process weakens coverage for those with pre-existing conditions. While Obamacare absolutely bars any insurer from denying coverage based on a pre-existing condition, the new law allows states to seek waivers that could allow insurance companies to set premiums based on one’s medical background. States would also be able to apply for waivers that would allow insurers to sell plans that don’t include benefits mandated by Obamacare.
Another point of controversy is the plan’s overhaul of Medicaid. The law includes several major changes to Medicaid, including a general shift in responsibility from the federal government to the states. This would likely result in less overall funding for the program, which could result in coverage rollbacks.
A Congressional Budget Office study projects that the AHCA would cut the federal government’s Medicaid spending by 25% by 2026. The CBO also said that the new law would result in 24 million more uninsured people by that year.
So how should investors approach today’s monumental vote? Well, like with anything that brings uncertainty into play, it’s best to approach with caution.
Of course, the most important stocks to watch will be the massive insurance companies, including UnitedHealth UNH, Anthem ANTM, Humana HUM, Aetna AET, and Cigna CI.
If you glance back at their historical prices, these stocks didn’t have a massive immediate reaction to the passage of Obamacare in March 2010, but they have all been climbing higher since. In fact, insurers are hitting new highs despite their struggles to profit on Obamacare enrollees.
Investors should also keep an eye on the major health-related ETFs. Those that could see an effect from today’s vote include the iShares U.S. Healthcare Providers ETF IHF, iShares U.S. Medical Devices ETF IHI, iShares Nasdaq Biotechnology ETF IBB, SPDR S&P Biotech ETF XBI, and the Health Care Select Sector SPDR Fund XLV.
All of these industries will be impacted, as the GOP plan has wide-ranging repercussions for overall access to care, as well as taxes imposed on companies and consumers. However, the same could be said about Obamacare, and historical price data shows that these tickers were all relatively flat during the week that the law passed.
Investors will likely display some sort of initial reaction, but the market could be hesitant regardless of whether the vote passes or not. As mentioned, the Senate will likely make changes, and there seems to be a certain lingering uncertainty about how the AHCA will look in practice—as there also was with Obamacare.
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