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Are Health Insurance Stock Investors Rooting For Donald Trump?
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Earlier this week, health insurer Aetna Inc. announced its second-quarter earnings results. Despite beating our estimates for both earnings and revenue, Aetna highlighted some troubling signs about the state of the industry and the effectiveness of the Affordable Care Act.
Aetna said that it expects to lose about $300 million dollars on its Obamacare business this year. The insurance giant also said that it is cancelling plans to expand its Obamacare offerings into five new states, and it will reassess its existing business in the 15 states it currently covers.
Aetna’s Obamacare struggles are the latest in what appears to be a growing trend in the industry. UnitedHealthcare (UNH - Free Report) , the nation’s largest insurer, has announced that it will be reducing the number of counties it offers Obamacare plans in to just 156 from over 1,200 counties.
Across the board, health insurance companies are saying that Obamacare-covered patients are too costly to cover and get sick too often. In fact, patients with Obamacare plans cost about 22% more on average to cover than those with employer plans.
Although insurance stocks popped with the implementation of Obamacare, the assumption that more customers would equal more profits isn’t necessarily proving to be true. Obamacare continues to be a hot political issue, and with a contentious election around the corner, investors might already be looking at which candidates will help or hurt the healthcare industry.
Trump’s Platform
Both Donald Trump and Hillary Clinton have been outspoken on the topic of healthcare reform, with both candidates taking unsurprisingly opposite positions. Now that it looks like Obamacare’s current form may not be helping insurance companies, investors in these companies may also be looking for regulatory reform.
Right now, it might make sense that investors with large stakes in health insurance companies might be rooting for the polarizing Republican nominee. From the earliest days of his campaign, Trump has been rather upfront with his desire to repeal Obamacare, and the billionaire businessman has always appeared to be a proponent of a free market economy.
Trump’s official campaign website details a seven-part plan for healthcare reform, with several points that would have a direct impact on insurance companies. First of all, Trump firmly states that he will repeal Obamacare and eliminate the individual mandate, which requires citizens to purchase a healthcare plan.
Trump also says that he wants to modify laws that inhibit the sale of health insurance across state lines, and he would like to implement block grant Medicaid to States. Trump’s stances on this topic fall in line with that of many classic conservatives. The general idea is that less government regulation will allow businesses to operate more freely and efficiently.
Competing Ideologies
At the end of the day, however, this all comes down to your fundamental political beliefs. An America without an individual mandate was the norm, and it led the country to have an uninsured rate of over 15%. Since the implementation of Obamacare, the uninsured rate has fallen to about 9%, its lowest point in 50 years.
While it has been tough for health insurance companies to turn profits under the current Obamacare plans, simply repealing Obamacare would almost certainly cause millions of Americans to revert back to being uninsured.
Typically, the idea is that a more free market will also lead to a reduction of costs, which would eventually lead premiums to go down, making healthcare affordable for all. If Trump wins and that happens, he certainly looks like a genius.
On the other hand, Democratic nominee Hillary Clinton thinks the best way to combat high costs is to target drug makers and other providers that manipulate prices. This would most likely come in the form of an expansion of the Affordable Care Act.
Like a lot of cases in politics, there’s a good chance both candidates’ plans could work, but there certainly is a disagreement on how to get things done.
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Are Health Insurance Stock Investors Rooting For Donald Trump?
Earlier this week, health insurer Aetna Inc. announced its second-quarter earnings results. Despite beating our estimates for both earnings and revenue, Aetna highlighted some troubling signs about the state of the industry and the effectiveness of the Affordable Care Act.
Aetna said that it expects to lose about $300 million dollars on its Obamacare business this year. The insurance giant also said that it is cancelling plans to expand its Obamacare offerings into five new states, and it will reassess its existing business in the 15 states it currently covers.
(Also read: Why Are Health Insurers Ditching Obamacare?)
Aetna’s Obamacare struggles are the latest in what appears to be a growing trend in the industry. UnitedHealthcare (UNH - Free Report) , the nation’s largest insurer, has announced that it will be reducing the number of counties it offers Obamacare plans in to just 156 from over 1,200 counties.
Across the board, health insurance companies are saying that Obamacare-covered patients are too costly to cover and get sick too often. In fact, patients with Obamacare plans cost about 22% more on average to cover than those with employer plans.
Although insurance stocks popped with the implementation of Obamacare, the assumption that more customers would equal more profits isn’t necessarily proving to be true. Obamacare continues to be a hot political issue, and with a contentious election around the corner, investors might already be looking at which candidates will help or hurt the healthcare industry.
Trump’s Platform
Both Donald Trump and Hillary Clinton have been outspoken on the topic of healthcare reform, with both candidates taking unsurprisingly opposite positions. Now that it looks like Obamacare’s current form may not be helping insurance companies, investors in these companies may also be looking for regulatory reform.
Right now, it might make sense that investors with large stakes in health insurance companies might be rooting for the polarizing Republican nominee. From the earliest days of his campaign, Trump has been rather upfront with his desire to repeal Obamacare, and the billionaire businessman has always appeared to be a proponent of a free market economy.
Trump’s official campaign website details a seven-part plan for healthcare reform, with several points that would have a direct impact on insurance companies. First of all, Trump firmly states that he will repeal Obamacare and eliminate the individual mandate, which requires citizens to purchase a healthcare plan.
Trump also says that he wants to modify laws that inhibit the sale of health insurance across state lines, and he would like to implement block grant Medicaid to States. Trump’s stances on this topic fall in line with that of many classic conservatives. The general idea is that less government regulation will allow businesses to operate more freely and efficiently.
Competing Ideologies
At the end of the day, however, this all comes down to your fundamental political beliefs. An America without an individual mandate was the norm, and it led the country to have an uninsured rate of over 15%. Since the implementation of Obamacare, the uninsured rate has fallen to about 9%, its lowest point in 50 years.
While it has been tough for health insurance companies to turn profits under the current Obamacare plans, simply repealing Obamacare would almost certainly cause millions of Americans to revert back to being uninsured.
Typically, the idea is that a more free market will also lead to a reduction of costs, which would eventually lead premiums to go down, making healthcare affordable for all. If Trump wins and that happens, he certainly looks like a genius.
On the other hand, Democratic nominee Hillary Clinton thinks the best way to combat high costs is to target drug makers and other providers that manipulate prices. This would most likely come in the form of an expansion of the Affordable Care Act.
Like a lot of cases in politics, there’s a good chance both candidates’ plans could work, but there certainly is a disagreement on how to get things done.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>