Insurer Centene Corp. fell the most in almost a year and hospital operators including Tenet Healthcare Corp. dropped after officials in President Donald Trump’s administration said they would immediately stop making Affordable Care Act cost-sharing reduction subsidy program payments, a move that could destabilize the market and hurt company earnings, credit ratings and dealmaking.

The announcement is fueling fears that the payments, known as cost-sharing reduction subsidies, really will end immediately, which could hurt hospitals and those insurers still in the marketplace. Fourth-quarter and 2018 earnings for hospitals are “now at risk” and current estimates are probably too high, Mizuho Securities analyst Sheryl Skolnick wrote in a note to clients.

“The effect of the order is likely to be profoundly destabilizing,” Skolnick said.

(Related: Trump Threatens Individual Health Chaos as He Cuts Off Insurer Subsidy)

The late-night move by Trump may spur HCA Healthcare Inc., the largest publicly traded hospital operator, to consider going private, she suggested. It may also drive further degeneration of credit quality for already indebted hospital operators such as Tenet, Community Health Systems Inc. and Quorum Health Corp. The subsidies were meant to help insurance companies cover poor patients.

Centene, one of the few remaining health insurers that has pressed forward into the Affordable Care Act marketplace, fell as much as 11% to $83.56 in New York, the biggest slide since November 2016. About 15% of Centene’s earnings come from Obamacare markets, Leerink analyst Ana Gupte estimated.

Tenet dropped as much as 12% to $12.25. Community Health Systems fell as much as 11% to $5.32. HCA Healthcare Inc., the largest publicly-traded U.S. hospital operator, slid as much as 4.1% to $71.18

Industry Reacts

While the selloff was under way on Friday, trade groups representing insurance companies, hospital operators and doctors blasted the announcement.

America’s Health Insurance Plans and the Blue Cross Blue Shield Association, two main insurance industry trade groups, said in a joint statement that there will be “real consequences” to Americans who rely on the payments to lower costs.

Hospital (Photo: iStock)

(Photo: iStock)

“We need constructive solutions that increase consumer choice, lower consumer costs and stabilize local markets,” the groups said. “Terminating this critical program will do just the opposite. This action will make it harder for patients to access the care they need. Costs will go up and choices will be restricted.”

The American Medical Association, the largest U.S. physician association, said the action undermines current law and creates more uncertainty in the marketplace, just as open enrollment is about to begin for 2018.

“Our patients will ultimately pay the price,” the group said.

America’s Essential Hospitals said the decision wouldn’t fix the current law’s shortcoming and could leave families with “no options at all” for affordable coverage.

“It only will destabilize the insurance market and drive costs higher for patients who can least afford increases,” the group said in a statement.

While the White House has said the payments would end immediately, any action to stop them would likely face a legal battle after 17 states and the District of Columbia won the right in August to defend the payments in a court case.

Thursday’s announcement “is likely not the final word,” Evercore ISI’s Michael Newshel said, as looming litigation and bipartisan talks to appropriate funds for the payments are expected to be pushed forward.

—-Read 3 Weird Ways an ACA Subsidy Cut Could Help You on ThinkAdvisor.

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