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Zacks Industry Outlook Highlights: Anthem, Cigna, Aetna, Humana and Molina Healthcare

For Immediate Release

Chicago, IL – June 06, 2017 – Today, Zacks Equity Research discusses the Industry: Health Insurance, Part 2, including Anthem Inc. (NYSE:ANTM Free Report ), Cigna Corp. (NYSE: CI Free Report ), Aetna Inc. (NYSE: AET Free Report ), Humana Inc. (NYSE: HUM Free Report ) and Molina Healthcare Inc. (NYSE: MOH Free Report ).

Industry: Health Insurance, Part 2

Link: https://www.zacks.com/commentary/116502/will-health-insurers...

Though the health insurance industry has always faced regulations, the Affordable Care Act (ACA, or Obamacare), enacted in 2010, was so heavy on regulatory oversight that it made health insurance almost synonymous with regulations. The reform, with its numerous provisions, took away working flexibility from insurers who were at ease before it was enacted.

The industry did eventually adjust to the new regulatory regime, but they likely have to go through that process all over again as the GOP comes through on its ‘repeal & replace’ mandate. The new law, called American Health Care Act, or AHCA, has been passed by the House of Representatives already and is currently in the Senate.

A lot is still up in the air at this stage, but the overall expectation is that the new regulatory framework will provide for a relatively lighter regulatory touch and will be friendlier to the industry. That said, the expected change would have some negative effects on the industry as well.

The year so far has been an eventful one for the industry, which saw two mega-mergers – Anthem Inc. (NYSE: ANTM Free Report ) with Cigna Corp. (NYSE: CI Free Report ) and Aetna Inc. (NYSE: AET Free Report ) with Humana Inc. (NYSE: HUM Free Report ) – being blocked by regulators on antitrust concerns. The industry has also been receiving jolts from executive orders and the initial bill drafted by President Trump’s aides in March.

Key AHCA Changes

The new proposed law (AHCA) is a major departure from the existing statute, with some of its provisions potentially net negatives for the industry.

  • AHCA gets rid of the individual mandate that required everyone to have health insurance.

  • The new law changes the way Medicaid gets funded – from an open-ended program to one with block grants or fixed amounts. Please note that Medicaid expansion was the primary avenue through which ACA expanded health coverage.

  • Cutting down subsidies that were provided under the ACA to people enabling them to subsidized policies. The AHCA aim to replace these subsidies with tax credits, which is dependent on the age of the customer.

Changes to the way Medicaid get funded represent the biggest change that the proposed law makes in the country’s healthcare system. Changing Medicaid from an open-ended entitlement to a fixed annual amount could potentially force states to become creative in how they administer this system, though most non-partisan analysts expect the move to reduce the number of insured.

A report from PwC estimates that insurers likely would lose most of the $1.9 trillion in federal ACA-related subsidies slated to be doled out over the next 10 years. The Congressional Budget Office (CBO) estimates that 23 million people would lose health coverage by 2026.

Per the CBO, AHCA would cause 14 million more people to be uninsured in 2018. The number is expected to reach 19 million in 2020 and 23 million in 2026. In 2026, about 51 million people under the age of 65 would be uninsured compared with 28 million who would lack insurance that year under Obamacare. This is a potentially negative development for companies with Medicaid-centric businesses such as Molina Healthcare Inc. (NYSE: MOH Free Report ).

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Anthem, Inc. (ANTM): Free Stock Analysis Report
 
Cigna Corporation (CI): Free Stock Analysis Report
 
Aetna Inc. (AET): Free Stock Analysis Report
 
Humana Inc. (HUM): Free Stock Analysis Report
 
Molina Healthcare Inc (MOH): Free Stock Analysis Report
 
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