Health Insurers Hit Record as Split Congress Removes Risk
(Bloomberg) -- A rally in managed-care stocks is propelling health care to the top spot in the S&P 500 as a divided Congress removes the risk of major changes to the U.S. health system.
The S&P 500 Managed Care Index rose as much as 4.5 percent to an all-time high, led by a rally in insurers focused on the Medicaid program. Centene, WellCare Health and Molina are among the providers that stand to benefit from the three states that have voted to expand Medicaid coverage.
“A relief rally is logical given that the other outcomes were leading to likely increased headline risk,” said Jefferies health strategist Jared Holz.
Republicans having little chance at repealing or making significant changes to the Affordable Care Act is good news for health insurers, particularly those that still have exposure to the health exchanges, according to Bloomberg Intelligence analyst Jason McGorman. While mid-term victories by Democrats clear lead to a bigger debate on Medicare for All, a single-payer system is still seen as “wishful thinking at best,” Holz noted.
Humana’s boost to its full-year earnings forecast after beating third-quarter estimates is adding to the momentum in the sector. The solid quarter, a good 2019 selling season so far, and a purple Congress set the insurer up well for outperformance into next year, Leerink analyst Ana Gupte wrote in a note after the report.
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