The 2024 Election: A Wild Ride for Health-Care Stocks
The upcoming presidential election is already injecting significant volatility into the health-care sector, with investors closely watching the potential impact of shifting political control. This year’s election is expected to produce contrasting health policy outcomes, depending on who wins. With Affordable Care Act (ACA) subsidies set to expire next year and Medicare Advantage plans facing growing scrutiny, health insurers are particularly sensitive to the political winds.
Key Takeaways:
- Health-care stocks are volatile in election years, particularly in the year following, with a tendency to outperform in the second year after an election.
- Republican leadership is expected to lead to less regulatory oversight, potentially boosting certain managed-care companies and Medicare Advantage plans while ending expanded health-care subsidies.
- A Democratic victory could lead to an extension of ACA subsidies, benefiting hospital systems and insurers focused on Medicaid.
- Managed-care companies generally perform well in the first year after an election, while hospital stocks often benefit from a Democratic win.
The Impact of a Republican Win
Analysts anticipate a Republican sweep would lessen regulatory scrutiny from the Federal Trade Commission (FTC) and Department of Justice (DOJ) while still seeking to lower drug prices. However, such a victory could also spell the end of expanded individual health-care subsidies established under the ACA. This would mean reduced monthly premiums and out-of-pocket costs for middle- and low-income individuals would expire at the end of 2025, potentially leaving millions uninsured.
"A GOP sweep could assure that," says Raymond James analyst Chris Meekins. The end of subsidies is expected to negatively impact hospitals and managed-care companies due to lower enrollment.
However, a Trump win is seen as positive for Medicare Advantage carriers, such as Centene, Molina Healthcare, UnitedHealth, and Humana. These plans provide coverage similar to traditional Medicare but with additional benefits like vision and dental care.
"A Trump administration would be more favorable from a rate perspective, which will help alleviate some of the cost issues [Medicare Advantage carriers] have been feeling," says Meekins.
Managed-care companies generally defy the broader trend in health stocks and outperform in the first year after an election, according to Raymond James. Analysts anticipate UnitedHealth, Humana, and CVS Health to be significant beneficiaries of a Trump victory, particularly due to the anticipated easing of regulatory pressures.
The Impact of a Democratic Win
Conversely, a Democratic win is expected to benefit managed-care companies linked to the ACA and hospital systems, as it would likely lead to an extension of the ACA’s expanded subsidies. Bernstein analyst Lance Wilkes sees Centene as a primary beneficiary, given its position as the largest Medicaid managed-care organization.
"We would see some stock price headwinds for CNC, but more limited due to valuation levels and lower focus on Medicaid reform this time," says Wilkes.
Analysts also anticipate a Democratic win would benefit Oscar Health, HCA Healthcare, and Tenet Healthcare, with an extension of subsidies anticipated to bolster enrollment in the ACA exchanges.
"A Democratic sweep would almost guarantee an extension of the Affordable Care Act expanded subsidies, which would be a clear positive for OSCR," says Raymond James analyst John Ransom.
The Future of Health-Care Stocks
The 2024 election will undoubtedly shape the landscape of the health-care industry for years to come. Investors are closely monitoring the political climate and adjusting their portfolios accordingly, hoping to capitalize on the potential opportunities and mitigate risks presented by these significant shifts in policy.
Key companies to watch:
- UnitedHealth Group (UNH): Largest private insurer in the US, seen as a potential winner under both scenarios due to its strong performance and focus on cost-cutting measures.
- Centene (CNC): Largest Medicaid managed-care organization, expected to benefit from a Democratic win due to its focus on ACA programs.
- Humana (HUM): Major Medicare Advantage provider, seen as a winner under a Republican administration.
- Oscar Health (OSCR): Relatively new ACA exchange player, anticipated to benefit from a Democratic win and the potential extension of subsidies.
- HCA Healthcare (HCA) and Tenet Healthcare (THC): Hospital systems with significant exposure to the ACA exchanges, expected to benefit from a Democratic win.
The upcoming election promises to be a crucial turning point for the health-care sector, with investors carefully navigating the uncertainties and seeking to capitalize on the potential winners. The battle for the White House may be focused on broader political issues, but the implications for health-care stocks are clear: The outcome will shape the future of healthcare access, pricing, and regulation for years to come.
