The recent election of President Donald Trump has led to a surge in stock prices for health insurers, indicating optimism about a more favorable regulatory environment for Medicare Advantage (MA) plans and potential mergers.
Major players in the health insurance sector, including CVS Health, Humana, and UnitedHealth Group, have seen significant gains in their stock values. CVS Health reported an 11.24% increase, Humana saw an 8.56% increase, and UnitedHealth Group rose by 6.03%.
This positive market response comes as CVS Health announced a profit of $87 million for the third quarter, although its year-to-date profit has decreased from $6.3 billion in 2023 to $3 billion.
The Trump administration is expected to adopt a more lenient stance towards Medicare Advantage, which contrasts with the current administration's approach. Insurer-backed trade groups have criticized President Joe Biden's administration for imposing stricter standards on MA plans, leading to challenges for insurers despite their reported profits.
The potential for a more relaxed regulatory environment under Trump raises questions about the future of Medicaid and the Affordable Care Act (ACA). Analysts predict that Republicans may cut federal funding for state Medicaid programs and impose work requirements for beneficiaries, which could adversely affect companies like Centene and Molina Healthcare. Both companies are already experiencing slight market dips. The expiration of ACA subsidies at the end of 2025 poses additional risks for insurers reliant on these financial supports. Oscar Health's stock has plummeted by 14.29% as a result.
Despite the challenges, some insurers believe that there is sufficient support for the ACA in conservative regions, which may compel lawmakers to protect enhanced tax credits. However, Trump's goal of repealing and replacing the ACA casts uncertainty over the future of these subsidies.
The potential for increased mergers and acquisitions is also expected under the Trump administration, as deals that may have faced scrutiny under a Democratic administration are likely to be greenlit.
Cigna's recent announcement of stock buybacks suggests that a merger with Humana is currently off the table, despite ongoing discussions between the two companies. On the other hand, UnitedHealth is looking to finalize a deal with home healthcare provider Amedisys, valued at over $3 billion, indicating a strategic shift towards expanding its service offerings.
As the health insurance industry navigates potential mergers and the future of Medicaid and the ACA, the coming months will be critical in shaping the trajectory of health insurance in the United States.