Analysts expect Democratic control in Washington to boost health insurers' bottom line, particularly for payers that focus their business on the Affordable Care Act exchange and Medicaid managed-care.
After Democratic wins in run-off Georgia elections were certified on Jan. 6, stocks of Centene Corp., Molina Healthcare and UnitedHealth Group rallied, with shares of St. Louis-based Centene rising 10.8%, the Long Beach, Calif.-based Molina increasing 9.16% and the Minnetonka, Minn.-based UnitedHealth Group growing 4.2% by the close of the market that day.
Since then, prices have been less robust. Shares of Molina have remained strong, increasing 0.4% on Friday, while UnitedHealth Group decreased 0.4% and Centene dropped 2.2%. The S&P 500 Index and the Dow Jones have remained high since the election results were announced.
"They've had a very good week to start the year so far and I think that's because they were encouraged by what they saw out of Georgia," said Chris Meekins, an analyst at Raymond James.
Meekins said Democrats' big moves will be to increase subsidies for the ACA, enact a special enrollment period for people to buy plans through the exchange and to encourage more states to expand Medicaid through additional funding. He noted that in June House Democrats passed the "Patient Protection and Affordable Care Act Enhancement" bill, which advocated for those moves along with reducing drug pricing. The legislation, named HR 1425, is currently sitting in the Senate. Biden has said he wants to create a public option for residents living in states that have not expanded Medicaid.
"Medicaid is what we're watching most because the administration has not put out what numbers they would like to see for the Medicaid side of things," Meekins said. "I think it's still an open question of what the result could be."
A delay in Medicaid redeterminations could negatively impact insurers, however, since it would put more pressure on insurers to manage the health of that population at a time when state budgets are decreasing. A likely increase in the corporate tax rate could also negatively impact insurers' bottom lines, Meekins said.
Brad Ellis, senior director of insurance at Fitch Ratings, also said he expected to see a renewed push to expand Medicaid under President-elect Biden's administration, with insurers beginning to reap the rewards of this plan in mid-2021.
In addition to expanding Medicaid, Ellis noted that Biden has been a strong proponent of a public option for the individual market and that, if passed, a BidenCare plan would create a moderate credit negative to insurers' ACA business by creating a competitor on the exchange "that could conceivably operate at a deficit indefinitely, and could therefore offer very competitive premium rates." That said, Ellis said the Senate majority is "razor thin," noted Democratic House control was weakened in the November election and added that the health insurance industry will likely fight very hard against the creation of a public option "as they did when it was considered, and dropped, in the original ACA legislation." He said he did not expect the proposed policy to impact health insurers finances in 2021.
In a research note, Cantor Fitzgerald research analysts Steven Halper and Kyle Mikson likewise said they did not expect a Democratic-controlled Senate to change much around a single-payer or universal option this year. They said there is a possibility that Democrats could seek to develop a Medicare buy-in or other government option, but that those initiatives would happen after 2021, and that they would not have a major impact on commercial plans or Medicare Advantage.
Instead, they said most Democrats instead support beefing up the public exchange and another fiscal stimulus to help states pay for budget shortfalls caused by the COVID-19 pandemic. They wrote that these moves would benefit managed-care investors, as federal funding to states "should ease pressure on the state's respective Medicaid programs," which contract with managed-care companies.
"Most mainstream Democrats, in our view, support enhancing the ACA and implementing various changes in order to decrease the number of uninsured," they wrote.
