Healthcare Sector To Remain Volatile In 2020 Amid Elections
Zacks Investment Research | Feb 25, 2020 08:46PM ET
The presidential elections induce the biggest uncertainty for health insurers and hospitals in 2020 due to the potential shifts in policies over the next four years. Given the differing policies of both the Republican and the Democratic parties, there brews a heightened element of anxiety among the sector participants.
This election year, the health insurance and the hospital stocks are confronted with a major political problem, that is, the rising of “Medicare for All” as a polestar for the Democratic Party with the recent caucus win of Bernie Sanders. This might dismantle America's private health care system, which mostly dependent on health insurance companies.
Strong results in New Hampshire, Iowa and Nevada helped Sanders, the Vermont senator, to achieve a landslide victory. The recent developments are likely to make him win the democratic nominations and face Donald Trump in the presidential elections.
The ascension of Sanders as a frontrunner makes the healthcare sector jittery because of his ‘Medicare for All’ plan to reform the U.S. healthcare.
This proposal basically propagates universal health insurance under a single government-run, taxpayer-financed plan. It seeks to eliminate private health insurance, replacing it with a universal Medicare plan, on expectation that the same would reduce administrative inefficiencies and control costs in the health-care system.
Sanders’ lead in the presidential election prompted health insurers to anticipate that his plan would replace the current private insurance policies and eat into their earnings.
Management at UnitedHealth Group Inc. (NYSE:UNH) had earlier stated that the “Medicare for All” would “surely jeopardize the relationship that people have with their doctors, destabilize the nation’s health system and limit the ability of clinicians to practice medicine at their best.”
Health insurance companies have been expanding in Medicare Advantage on the back of its very attractive market and the spending on the same by the government is projected to be $860 billion for 2020. With nearly 10,000 baby boomers aging daily into Medicare, this business provides scope for significant growth.
UnitedHealth Group, which holds the number one spot with more than 25% of the MA market share, has seen its shares drag for the past two days in a row. The stock shed 5.9% of value in yesterday’s trading. Humana (NYSE:HUM) still holds the second position and CVS Health (NYSE:CVS) (having gained exposure to the MA market with its last-year acquisition of Aetna (NYSE:AET)) occupies the third place. Anthem Inc. (NYSE:ANTM) and Centene Corp. (NYSE:CNC) follows lower in ranks.
Humana, Anthem, Centene, Molina Healthcare (NYSE:MOH) , each also declined 5.1%, 3.6%, 5.7% and 6.6%, respectively.
Moreover, hospital companies like HCA Healthcare (NYSE:HCA) and TenetHealthcare (NYSE:THC) lost 5% and 10.5% due to fears that their revenues could be squeezed if the federal government is the country’s “single payer.”
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