Insurer, hospital stocks down after Sanders cements front-runner status for Democratic nomination

Bernie Sanders
Bernie Sanders' dominant win in the Nevada caucuses has unleashed a new wave of stock market jitters for insurers and providers. (Gage Skidmore/Wikimedia Commons)

Stocks for major insurers and hospital groups opened down on Monday in the wake of Sen. Bernie Sanders’ dominant win in the Nevada caucuses on Saturday that cemented his status as the front-runner for the Democratic presidential nomination.

Payers and providers have been worried about Sanders’ push for “Medicare for All,” which would abolish private insurance and pay providers at the Medicare rate that is far below private insurance.

At the time of publication, stocks for major insurers were down across the board, with UnitedHealth Group leading the way with a 7.36% decline. That was followed by Cigna, which was down by 6.48%, Humana down by 5.85% and Anthem down by 5.59%. The stock price for CVS Health, the parent company of Aetna, was down by 4.22%.

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Insurers that rely primarily on government business such as the Affordable Care Act exchanges or Medicare Advantage were also down, with Centene down by nearly 10% and Molina Healthcare by 7.3%. The XLV Health Care Select Sector Index, which represents the healthcare sector of the S&P 500, was also down by 2.57%.

Stocks for major hospital systems were also trading down on Monday, although not as much as insurers. For example, HCA Healthcare was down by 4.5% as of press time, as was Universal Health Services at roughly 1%.

To be sure, the markets overall are down due to concerns over a worsening Coronavirus outbreak. The Dow Jones is down by 950 points at the start of trading.

Wall Street analysts say that healthcare stocks could be in for a rough ride for the next couple of months as the primary race progresses, but the real impact won't be known until later this year.

"The market will have to digest the real possibility that Sanders could emerge as the nominee from a brokered convention in July," according to an investment note Sunday from J.P. Morgan. 

Market analysts also have to wait for credible polling between Trump and Sanders in swing states and then look at the makeup of the Senate to handicap the possibility that Democrats could regain control, the note added. 

Currently Republicans hold a 53-47 majority in the Senate, but a three-seat pickup and Democratic control of the White House would mean a Democratic majority. Sanders could use a little-known budgetary procedure called reconciliation to get Medicare for All through the Senate by a simple majority and bypass a filibuster.

A Trump re-election, Republicans maintaining control of the Senate or the nomination of a non-progressive Democrat will "prove to be a positive catalyst for the [healthcare facility and managed care] sector," J.P. Morgan said.

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Polling shows that the U.S. populace remains divided on support for “Medicare for All.”

A poll released by the Kaiser Family Foundation last week showed that about 52% support “Medicare for All.” But a large majority of Americans (66%) favor a government-run public insurance option that has been proposed by several moderates in the campaign.

Sanders, who also won the popular vote in Iowa and the New Hampshire primary, will attempt to keep his winning streak alive in the South Carolina primary this Saturday. He could be poised for a major series of wins during Super Tuesday on March 3, when 14 states including Texas and California hold presidential primaries.