Trump's Law Downgrades Centene, HCA Healthcare Ratings

The recent enactment of a new law by former U.S. President Donald Trump has significantly impacted the healthcare sector, leading to a downgrade in ratings for two prominent companies in the industry. The U.S. bank has lowered its ratings for Centene, a healthcare management company, and HCA Healthcare, a hospital operator, due to concerns over the potential effects of the new legislation.

Analyst Joanna Gajuk from the U.S. bank has revised Centene's rating from "neutral" to "underperform," significantly lowering the target price from $52 per share to $30 per share. Gajuk's analysis highlights that the new law, known as the "Big Beautiful Law," will likely slow down the growth of Centene's Medicaid and ACA exchange terminal markets. Additionally, the law increases the possibility that exchange subsidies will expire this year, adding to the company's challenges.

Gajuk noted, "Given the significant changes in the risk pool, we anticipate that the downside risk for exchange pricing in 2026 will be greater than the upside risk." She further explained, "As reforms such as work requirements in the reconciliation bill take effect, the negative impact on Medicaid enrollment will become apparent starting in 2027."

Gajuk also downgraded HCA Healthcare's rating from "buy" to "neutral," slightly adjusting the target price from $410 per share to $394 per share. The analyst pointed out that the reduction in ACA exchange and Medicaid funding will create headwinds for the company. "As enrollment decreases, this could lead to a slowdown in hospital visit growth and an increase in bad debt," Gajuk wrote. However, she acknowledged that HCA Healthcare is relatively less affected by these negative factors compared to its peers, and its scale advantages will help mitigate the impact. "We believe the law significantly increases the likelihood that exchange enhanced subsidies will also expire, creating additional headwinds in 2026," Gajuk added.

The downgrades reflect the market's growing concern over the potential fallout from the new law. The healthcare sector, which has long been a target for regulatory changes, is now facing significant challenges due to the new legislation. Companies in this sector will need to adapt quickly to the changing regulatory environment and find ways to mitigate the impact on their operations and financial performance. The downgrades serve as a reminder of the importance of staying agile and responsive to regulatory changes in the healthcare industry.