Shares of hospital operators and health insurers took a plunge in trading Friday after the White House killed key Obamacare payments to health insurers.
President Donald Trump announced late on Thursday the administration will immediately stop making critically important payments to insurers who sell Obamacare health plans, a bombshell move that is expected to spike premium prices and potentially lead many insurers to exit the marketplace.
These cost-sharing reduction payments are reimbursements to insurers for discounts in out-of-pocket health costs they give to low-income Obamacare customers. Under the Affordable Care Act, the discounts must be offered.
The decision to end the billions of dollars worth of CSR payments came after months of threats by Trump to do just that. The news came only hours after Trump signed an executive order that Obamacare advocates said could badly harm the individual insurance marketplaces.
Without the payments, insurers may opt to charge higher premiums or back out of the Obamacare exchange markets. While consumers who qualify for subsidies may be insulated from these higher costs, those who pay full price may drop their coverage.
If fewer people are insured, hospitals may face higher costs from unpaid bills.
Among the hospital stocks headed lower on the news were Community Health Systems and Acadia Healthcare, which declined more than 5 percent and 3 percent, respectively. Universal Health Services declined more than one percent.
— CNBC’s Dan Mangan contributed to this report.