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UPDATE 1-U.S. hospital, insurer stocks drop after Trump ends subsidies

(Adds comment from hospital, policy expert, insurance commissioner)

NEW YORK, Oct 13 (Reuters) - Shares of U.S. hospital companies and health insurers fell on Friday after President Donald Trump said he would cut off Obamacare subsidies to health insurance companies for low-income patients, a move that could make healthcare less affordable next year for some people.

The subsidies were guaranteed to insurers under former President Barack Obama's 2010 Affordable Care Act to help lower out-of-pocket medical expenses for low-income consumers. State attorneys general are suing to fight the move.

Trump has made the payments each month since taking office in January, but has also attacked them as a "bailout" for insurance companies. It is the most profound of several moves he has made this month to undermine Obamacare.

Shares of insurer Centene Corp and Molina Healthcare both fell about 3 percent and Anthem Inc fell 2 percent.

The declines, however, were mitigated by the fact that insurers in most states submitted two sets of rates to regulators with one set 15 to 25 percent higher in case the subsidies were cut.

But, according to the National Association of Insurance Commissioners, some states did not allow insurers to submit these higher rates, which in most of the country were due at the end of September for 2018.

Insurers still may be able to make changes to rates or plan designs or pull out of markets, but the mechanism for doing that is not exactly clear, said Larry Levitt, a health policy expert at Kaiser Family Foundation.

A spokeswoman for Molina said that the company plans to continue participation in all the states where it is offering plans this year and where it filed for 2018, but that it would continue to evaluate its participation on a market-by-market basis.

In Kansas, which actively sought coverage in counties that were at risk of being abandoned by insurers, Insurance Commissioner Ken Selzer, a Republican, said that he does not expect insurers to pull out now.

HOSPITALS

Hospital shares fell as investors worried about the impact of the move on enrollment and on the ability of patients to pay for care.

Shares of hospital operators Tenet Healthcare, Community Health Systems and HCA Healthcare were down 4.8 percent, 6 percent and 0.4 percent, respectively, on Friday afternoon.

William Ferniany, the chief executive officer at the UAB Health System in Birmingham, Alabama, expects an impact from these insurance rate increases.

"If insurance prices go up for people on the exchanges, fewer people will have insurance," Ferniany said. (Additional reporting by Jilian Mincer and Caroline Humer; Editing by Frances Kerry and Diane Craft)