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Health Care Sector ETFs Are at the Mercy of Expiring Government Subsidies

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With pandemic-era subsidies beginning to expire, health care could become out of reach for many Americans, potentially dragging down the health sector and related exchange traded funds.

Year-to-date, the iShares U.S. Healthcare Providers ETF (IHF) declined 10.7% while the broader Health Care Select Sector SPDR ETF (XLV) fell 8.3%.

Premiums on the so-called Obamacare health insurance plans have declined this year but are expected to surge after government subsidies expire in December, the Wall Street Journal reported.

Healthcare costs have increased along with everything else, but Americans insured through the Affordable Care Act have been backed by generous federal funding as part of the $1.9 trillion American Rescue Plan Act.

If the subsidies were to fall through without any further progress from Congress, a typical enrollee with an income of $40,000 a year would see a 55% increase in premiums for a “silver” plan, while someone making $60,000 would experience a 36% jump, according to the Kaiser Family Foundation data.

Consequently, the higher costs for health insurance could simply be priced beyond some people’s means. Over three million people are expected to just drop their insurance plan because of rising costs, according to U.S. Department of Health and Human Services estimates.“The market really doesn’t […]

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