Several US health insurers saw notable stock price gains following the reelection of former US President Donald Trump amid an expectation of less federal scrutiny.
Humana Inc. experienced the largest increase as its stock rose 10.7% from Nov. 1 through Nov. 6, increasing from $260.71 a share to $288.51 a share. UnitedHealth Group Inc.'s stock price jumped 5.1% during the same period, from $567.56 a share to $596.69 a share.
The increases outpaced the S&P 500, up 3.5%, and the S&P Insurance Index, up 4.5%, during the same period. Elevance Health Inc.'s stock price increased by a more modest 3.6%, rising from $414.01 a share to $428.93 a share.
The jumps came amid expectations that a Republican power shift could be beneficial for Medicare Advantage-levered stocks, such as Humana and UnitedHealth, by taking aim at changes made by the Centers for Medicare & Medicaid Services (CMS), according to a research note from Stephens analyst Scott Fidel.
"A red Senate (and possibly red House) fosters an optimistic backdrop for legislation to debunk certain regulatory actions pursued by [Joe Biden's] CMS," including minimum staffing mandates, Fidel wrote, adding that the new administration could also benefit the M&A environment for health insurers.
In recent quarters, various managed care insurers have been highly critical of changes made by CMS, with Humana in particular both facing lawsuits related to its Medicare practices and filing lawsuits against CMS.
Not all managed care giants saw a bump following the election, with Molina Healthcare Inc. and The Cigna Group experiencing modest drops of 0.2% and 0.4%, respectively, from Nov. 1 to Nov. 6 and Centene Corp. dropping 1.5% during the same period.
Election outcomes may create uncertainty for Affordable Care Act-levered managed care insurers, while changes to support of government-backed subsidized healthcare, like Medicaid, are less likely to pose an issue for insurers, according to Fidel.
"While concerns could simmer around overall Medicaid funding, we view Medicaid supplemental payment programs having bipartisan state-level support," Fidel wrote.
Impact on M&A
Managed care insurers may benefit from an administration less likely to challenge M&A activity, according to J.P. Morgan analyst Lisa Gill.
Last year, rumors emerged that Humana was seeking to merge with Cigna, a move that was speculated to be complicated by an overlap in Medicare Advantage offerings between the two healthcare giants. While those talks reportedly fell through in late 2023, recent chatter indicates the two are again considering the idea.
There were some concerns from experts that a win by Democrats in November could be seen as a mandate for further scrutiny around competition, Gill wrote in a research note preceding the election. A potential change to Federal Trade Commission leadership, which has been active in monitoring the healthcare space, could soften the tone around competition, Gill wrote.
"While it may seem quite binary, the difference in administration come 2025 will drive the level of scrutiny that companies can expect around competition, and we think that it again emphasizes that a larger portion of election outcomes will be shaped on the regulatory/administrative side rather than legislatively," Gill wrote.
While it remains to be seen how much scrutiny a second Trump administration will apply to managed care M&A, there is no guarantee that a second Trump administration would avoid antitrust actions, Kevin Hahm, a partner with law firm Hunton Andrews Kurth LLP, said in an interview ahead of the election.
"Vertical mergers are usually an area where you would think an enforcement agency under a Republican or more conservative administration would not be as enforcement-minded, and I think that's generally true," Hahm said. "However, it was under Trump ... that [the Justice Department] challenged [the] AT&T/Time Warner merger, which was the first vertical merger challenge in over 40 years."