Health Investors Shrug as GOP Bill Faces Tough Road in Senate

(Bloomberg) — The House voted, and health stocks shrugged.

Hospital and health insurance stocks quickly bounced back Thursday after the U.S. House of Representatives voted for a bill that would defund large parts of the Affordable Care Act but faces a tough road in the Senate. In the minutes after the vote, the BI North America Hospitals Index fell as much as 1.6% before reversing to close up 0.2%.

The Republican bill, formally known as the American Health Care Act, passed by a vote of 217-213, would cut billions of dollars in health care spending and result in millions more Americans going without health insurance, according to the Congressional Budget Office.

(Related: 4 ACA Change Paths That Just Got More Popular)

“Everyone knew it was coming, and it was priced in,” said Ana Gupte, an analyst at Leerink Partners. “People do think it’ll get watered down in the Senate.”

Already, several key Senate Republicans said they will set aside the House health care bill and write their own version. The party holds a narrow 52-48 majority in the upper chamber.

The insurance industry’s main lobby, America’s Health Insurance Plans, criticized the House bill, saying the Senate should boost subsidies to help people afford insurance, and also ensure that enough funding is provided to state Medicaid programs.

“The American Health Care Act needs important improvements to better protect low-and moderate-income families who rely on Medicaid or buy their own coverage,” AHIP CEO Marilyn Tavenner said in a statement. “The tax credit should be enhanced to reduce premiums and better meet the needs of people with low and modest incomes, are older, or live in areas with high health care costs.”

The Standard & Poor’s 500 Managed Health Care Index finished the day up 0.7%.

The GOP bill would roll back an expansion of Medicaid, largely to people above the poverty level and to childless adults, cutting coverage for about 14 million people by 2026. Those reductions will save the government about $840 billion over 10 years, according to an analysis of an earlier version of the bill by the nonpartisan Congressional Budget Office. The CBO hasn’t made a final assessment of the current version.

The Medicaid rollback would have an impact on health insurers, especially those who provide Medicaid coverage to people under the law. But it would hit hospitals the hardest, since the Affordable Care Act’s subsidized expansion of insurance coverage has resulted in more paying customers.