Insurance stocks rise on report of Trump extending ACA subsidies
One of the most contentious issues in Washington at the moment is the debate over the extension of Affordable Care Act's (ACA) enhanced premium subsidies, which are set to expire at the end of the year.
The looming expiration of the premium subsidies is seen as a potentially significant political liability for Republicans going into next year's midterm elections.
If the subsidies expire, insurance premiums are set to drastically spike for the millions of Americans who get their insurance through ACA, which is widely known as Obamacare.
And Democrats are making it clear that the Republicans would be solely to blame for letting this happen.
That's because the ACA has been criticized by Republicans ever since it was signed into law by former President Obama in 2010, with many viewing it as overreach by the federal government into the private healthcare sector.
In fact, House Republicans continue threatening to repeal it, and President Trump has also long called for it to be tossed out.
The problem for Trump and the Republicans is that approximately 45 million Americans now get their insurance through ACA. Additionally, while Republicans have been saying for years that they want to replace it with something better, they've never proposed a replacement in the 15 years since Obamacare was passed.
But now it appears Trump might be willing to extend the ACA premium subsidies, with certain limits on eligibility.
According to a report by MS NOW (formerly known as MSNBC) on Sunday, Trump is set to propose a policy framework this week to address healthcare costs, which will include a two-year extension of the ACA premium subsidies.
The policy framework, which will reportedly be called the "Healthcare Price Cuts Act" will aim to end what a White House official described as “surprise premium hikes” that happen through ACA.
It will also eliminate “ghost beneficiaries,” which MS NOW notes is "a frequent Republican concern about alleged fraudulent policy recipients by requiring a small minimum payment as a means to verify eligibility to receive benefits."
The legislation would also incentivize lower-premium plans on the ACA exchange, according to the report.
Republicans revolt against Trump's proposal
News of the plan sent shares of Oscar Health (OSCR) and Centene Corp. (CNC) higher on Monday. Oscar's stock surged 22.3%, while Centene's gained 4.6%.
Both companies offer insurance plans through Obamacare, with Centene being the largest plan provider in the ACA marketplace, according to Barrons. Centene is down nearly 37% for the year as the looming threat of ACA subsidy expirations has put pressure on its stock.
Oscar has gained 22.7% YTD.
During the company's third-quarter earnings call earlier this month, Oscar CEO Mark Bertolini stressed the "long-term importance of the individual market," referring to the marketplace where ACA is bought.
He said the "individual market is the only source of affordable health coverage to 22 million Americans who power our economy."
"The majority of members are from the small businesses, service, and farming sectors, which together generate nearly half of US GDP," Bertolini added. "These hardworking people do not have access to employer coverage and rely on enhanced premium tax credits to fill the gap."
He noted that Oscar is "engaged with policymakers on both sides of the aisle to ensure Americans have access to the coverage they need."
But while Oscar and Centene rallied on the news of Trump's proposal, it remains to be seen how long it lasts. MS NOW reported on Monday that Trump delayed announcing his policy framework after Republicans in Congress rebelled against the proposed Obamacare subsidy extensions.
“I’ve talked to enough [Republicans] to know that people weren’t expecting this and aren’t happy about it,” one Republican told MS NOW. “I don’t see how a proposal like this has any chance of getting majority Republican support."