Government Medicare Proposal Triggers Sell-Off of Health Insurance Stocks

Government Medicare Proposal Triggers Sell-Off of Health Insurance Stocks

The progressive Democrats showed intentions of introducing a Government operated single-payer insurance system, replacing the private medical insurance providers. This potential proposal spooked investors and improved health insurance stocks. While the sector has witnessed substantial and steady gains for quite a few years, the legislative rollout could create an uncertainty period for the sector.

The ‘Medicare for All’ plan was shared by House Representative Pramila Jayapal after the markets closed. Following the announcement of the Seattle Democrat, S&P 500 managed-care stocks experienced the greatest three-day decline since September 15; falling 5.3%. The stock further incurred a 4.4% loss on the following Monday, the greatest intraday loss since 2015.

The sell-off was sighted by Wall Street experts as an overreaction to the policy proposal that has slim chances of being converted to law under the current Congress. An analyst even called the proposal to be “an impossible dream.”

This sell-off reveals investor’s fears that a shift of political ground could mean heightened scrutiny of health insurance businesses. This could create turmoil for stocks that have enjoyed a steadiness even when other sections of the healthcare industry were shaken by political tension.

Lately, pharmacy managers and drug makers have received quite some heat in Washington. Biotech Entrepreneur Martin Shkreli’s brazen price inflation received serious criticism from Hillary Clinton in 2015. The anger regarding the high cost of prescription medicines hasn’t faded since.

With the shrewd pricing practices coming into the spotlight, popular anger fueled by the Martin Shkreli scandal battered the biotech stocks since the mid-2015. Although the biotech and pharmaceutical makers’ stocks suffered, the stocks of health insurance companies kept ascending. In recent years, drug maker shares have been outperformed by health insurance indexes.

This divergence could reveal how political strife has affected drug makers and health insurers differently. The fight over revoking the Affordable Care Act, which led to the creation of insurance sectors and made coverage purchase mandatory for Americans, has left the insurance industry shaken. However, few politicians had questioned the health insurance business till now, and policies to eliminate it hadn’t been presented.

With several Democratic candidates embracing Medicare for All and more than 100 members of the Democratic House majority endorsing Jayapal’s bill; health insurers appear to be under enhanced risk.

While a majority has shown their support for Medicare for All, the support substantially diminished when they came to know that it would need higher taxes or eliminate private cover. The idea seemed more lucrative if it acted as a health insurance guarantee, reducing premiums and self-borne costs.

Progressive Democrats like Jayapal and Representative Alexandria Ocasio-Cortez have been pushing this message in their attempt to promote Medicare for All. Even though several presidential candidates have backed the proposal, they are likely to moderate their stands.

Health insurers like Now Health International have been highlighting the risks of Medicare for All. Kristine Grow from America’s Health Insurance Plans, an institution representing insurance providers, said that the bill will hurt consumers, patients and taxpayers. Americans might have to pay more.

New efforts for expansion of health coverage may benefit private insurers in the long run. Managing plans for senior citizens and Americans having low incomes for the Federal and State government is already a growing business for them.

Expressing his thoughts, Avalere Health founder, Dan Mendelson mentioned that the plans are the main business partner for federal government, playing a role in delivering the entitlements to consumers. He mentioned that it believed that it isn’t going to change.

He further added, that there is a broad anti-corporate sentiment which is rippling the Democratic party. It shouldn’t go further than that.