Analysts see health insurers’ share price pummeled by political turmoil tied to Trump impeachment inquiry

Sep. 27--Share prices of several large health insurers are being pummeled by political turmoil in Washington following the announcement that the U.S. House of Representatives has begun an impeachment inquiry against President Donald Trump, analysts say.

Shares of several insurers have dropped following the announcement Tuesday by Speaker Nancy Pelosi, Colin Scarola of CFRA Research said Thursday in a note to investors. Anthem Inc., Centene Corp., Cigna Corp., Humana Inc. and United HealthGroup Inc. were down 6% or more since Sept. 20, compared with a drop of 1% for the S&P 500, a broad index that tracks 500 companies.

"We think this is being partially driven by negative sentiment after the speaker of the House this week announced an impeachment inquiry of President Trump," Scarola said. "In our view, this reaction is due to many investors believing impeachment of a Republican president will tip the balance of power, increasing the odds of Democratic 'Medicare for All' proposals becoming law and eliminating private health plans."

Scarola believes the response is misguided. He cited polling by the Kaiser Family Foundation that estimated only 37% of voters support eliminating private health plans in favor of Medicare-for-All.

He maintained his positive outlook for the industry. In an interview, Scarola said Medicare Advantage, which is offered by private health insurers, has been growing at an 8% annual rate over the past five years, while Medicaid, a government program, "has flatlined."

"You can look at the Medicare and Medicaid markets to see how voters are choosing between government-run and private plans," he said. "If you can stomach the volatility it's a good long-term investment," he said of the health insurance sector.

Share prices of health insurers began tumbling months before Democratic leaders of the House launched the impeachment inquiry. Two indexes -- the S&P Managed Health Care and S&P 500 -- tracked closely until February when a Medicare for All bill was introduced in the House, Scarola said. Share prices of health insurers began their fall with the introduction of the legislation.

But even if analysts and investors believe the U.S. will not likely establish a government-run health care system, "the specter of a single-payer system (even though it won't be enacted) obliterating an industry is hard to shake," Bloomberg Intelligence analyst Brian Rye said. Hospitals also would be among the most hit by Medicare for All policies, he said.

Bloomberg News reported the S&P 500 Managed Health Care Index fell as much as 3.8% on Thursday to the lowest since April 18, when the sector saw its biggest sell-off this year as Medicare for All proposals gained traction in Congress.

Stephen Singer can be reached at ssinger@courant.com.

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