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Why health-care stocks aren't moving after President Trump's Obamacare executive order
MARKETWATCH 10:33 AM ET 1/23/2017
The directive is either symbolic or will bring the Affordable Care Act crashing down, experts say

President Donald Trump's first executive order after his Friday inauguration reinforced his administration's intent to repeal the Affordable Care Act and told federal agencies to reduce the law's regulatory and economic impact.

But reading the tea leaves has been a tall order. Experts differ wildly on whether the directive has any implications and where those effects may lie.

Some insisted that the act is symbolic, a nod to campaign promises rather than an indication of near-term changes.

"There is not likely to be much immediate initial change," said Evercore ISI policy analyst Terry Haines, calling the executive order a "tone setter."

"In essence, this is pure Trump: more sound and fury than substantive impact," said Height Securities analysts Spencer Perlman and Sumesh Sood.

By contrast, Mizuho's Sheryl Skolnick called it "the first death warrant for the ACA" and a "poison pen;" adding, "so much for a slow and smooth transition."

Read: Trump starts presidency by issuing executive order on health care, memo on regulations (http:// www.marketwatch.com/story/trump-starts-presidency-by-issuing-executive-order-on-health-care-memo-on-regulations-2017-01- 20)

The mixed messages, along with the fact that negative effects on certain sectors have been predicted for months (http: //www.marketwatch.com/story/nothing-in-health-care-is-a-sure-thing-under-president-elect-trump-2016-11-18), may well explain the lack of health care stock volatility in the executive order's aftermath.

Health Care Select Sector SPDR (XLV), iShares U.S. Healthcare ETF (IYH), Fidelity MSCI Health Care Index (FHLC) and Vanguard Health Care Index Fund (VHT) shares were slightly down in morning trade Monday, as was the S&P 500.

Shares of the funds have risen 0.2%, 0.8%, 0.8% and 0.8% respectively over the last three months, compared with a 6.1% rise in the S&P 500.

Much of the infrastructure of the ACA, also called Obamacare, is reinforced by a system of tax credits that subsidize plans on the exchange and an individual mandate that requires health coverage.

Not enforcing the mandate or subsidizing plans could send the exchanges into disarray as early as this year, many have warned (http://www.marketwatch.com/story/what-is-the-individual-market-and-why-is-everyone-so-worried-about-it-2016-12- 14).

Read more: What is the individual health insurance market and why is everyone so worried about it? (http:// www.marketwatch.com/story/what-is-the-individual-market-and-why-is-everyone-so-worried-about-it-2016-12-14)

(https://w.graphiq.com/w/koBlUHEwgdv)

Skolnick referenced both in her Saturday analyst note.

The executive order, paired with a case called House v. Burwell that will determine the future of the subsidies, could risk 2017 exchange enrollment and price out health coverage for millions, she said.

All portended only negative things to come for the hospital sector, which stands to lose when patients don't pay their hospital bills, she said.

"The best case was the status quo," Skolnick said. "The worst case is yet to come."

Read more: What we know about President Trump's post-Obamacare health plan (http://www.marketwatch.com/story/heres- what-we-know-so-far-about-president-elect-trumps-post-obamacare-health-plan-2016-11-14)

But many subsectors only stand to benefit, other analysts said.

The executive order, along with an administration-directed freeze on new regulations, are "market positive actions because they are signposts that show Trump keenly focused on regulatory relief for US businesses," said Evercore ISI policy analyst Terry Haines.

The executive order also nods to the importance of regulatory process in cabinet departments and agencies, Haines said, meaning any regulations can only be repealed through full rule making, which could take a year or longer.

Regulatory process and the fact that heads of the Department of Health and Human Services (http:// www.marketwatch.com/story/hhs-secretary-nominee-tom-price-refutes-accusations-of-improper-stock-buys-2017-01-18)and the Centers for Medicare and Medicaid Services haven't yet been confirmed suggest nothing will change for some time, Haines said.

See more about last week's contentious hearing for Tom Price, HHS Secretary nominee (http://www.marketwatch.com/story/ hhs-secretary-nominee-tom-price-refutes-accusations-of-improper-stock-buys-2017-01-18)

The Friday order could be both political gesture and have practical intent, said RBC Capital Markets analyst Frank Morgan.

"As we are in uncharted territory, it is difficult to assess what will happen practically as a result of the order; at a minimum, it is President Trump's first symbolic gesture to repeal the ACA," Morgan said.

Weakening the individual mandate could harm the ACA's marketplaces, but the executive order could also make the market more attractive to consumers by relaxing federal regulations there, he said.

-Emma Court; 415-439-6400; [e-mail]


(END) Dow Jones Newswires
01-23-171033ET
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