More health-care analysts are defending managed-care companies after Democrats’ new “Medicare for all” bill spooked investors on Wednesday, sending shares of health insurers to their lowest in a month.
Most agree that the bill has almost no chance of passing in the current Congress, with Veda Partners’ Spencer Perlman calling it “an impossible dream.” Analysts said the market’s response was an overreaction and recommended that investors to buy shares on weakness.
However, JPMorgan’s Gary Taylor cautioned that it may take some time for insurance stocks to recover.
Here’s what analysts are saying:
JPMorgan, Gary Taylor
“The bill has no chance of passing the Rep-controlled Senate and probably little chance even in the Dem-controlled House given Speaker Pelosi’s apparent ambivalence. But even if a Democrat were to win the Presidency, it is implausible the Democrats could regain the Senate with a 60-vote super-majority necessary to pass such extreme legislation.”
Regarding the market reaction: “We don’t envision a quick snap-back this week but do think the managed care stocks could rally off lows by summer” on strong earnings and lack of “Medicare for All” news. Taylor expects this rally to fade in the second half of the year as Democratic presidential debates begin in the fall.
JPMorgan recommends sticking to health insurers over hospitals and prefers payers with large Medicare exposure such as Humana Inc. and WellCare Health Plans Inc. to larger commercial exposure like Cigna Corp. and Anthem Inc.
SVB Leerink, Ana Gupte
“We see weakness on Medicare-for-All as a buying opportunity,” particularly for Medicare-exposed insurers where this could turn into a growth opportunity.
“While this Medicare-for-All proposal released yesterday is the opening gambit of the House Dems, there is not even consensus among the Democratic caucus, and we expect the fiscal, legislative, and political hurdles will drive this at most to be a voluntary buy up to Medicare for Americans aged 50-64 with private Medicare Advantage as an option.”
SVB Leerink sees the Medicare Buy-In Act and Medicare at 55 bills “as more likely solutions that could be considered by both parties.”
RBC, Frank Morgan
“Recent polling indicates low support once voters understand that they would lose their private insurance and taxes could increase. As such, this issue makes for good political banter, but we believe it is challenged from a practical standpoint and we see it as purely headline risk.”
Veda Partners, Spencer Perlman
“The political dynamics of the country and healthcare politics, in particular, make the likelihood of this legislation moving forward now or in a future Congress infinitesimally small.”
“The legislation introduced yesterday by Rep. Jayapal and her colleagues is even more aspirational than Sen. Sanders’ bill. The reality is that Democratic lawmakers are deeply divided by Medicare-for-All; the cosponsors likely represent that vast majority of the Representatives who would support the bill in a vote on the House floor.”
“Even if Democrats win the White House and the Senate and hold the House in 2020, we do not believe that it will create an environment that is ripe for passage of Medicare-for-All. First, the seats that Democrats would win are currently held by Republicans, meaning they very likely are swing seats and that the incoming Democrats are more likely to be moderates.”
© Copyright 2021 Bloomberg News. All rights reserved.