November 5, 2024

Healthcare Stocks and the 2024 Election: Trump vs. Harris and Their Impact on the Industry

Healthcare Stocks Await Election Result: The Impact of a Trump or Harris Presidency

Introduction

In the lead-up to the 2024 presidential election, healthcare stocks navigated a landscape marked by uncertainty. Although healthcare has not been a dominant issue during the campaign, the results could significantly affect the stock performance of health insurers and hospital companies. The distinction between a potential Trump victory and a Harris presidency is particularly pronounced for key players in the sector, such as Humana, HCA Healthcare, Oscar Health, UnitedHealth Group, CVS Health, and Tenet Healthcare.

The Landscape for Health Insurers

For many health insurers who have heavily invested in the Medicare Advantage program over the past decade, the year 2024 has turned out to be particularly challenging. Insurers anticipated a lower volume of medical services usage; however, demand from patients has surged. This increase has negatively impacted companies such as Humana and UnitedHealth.

According to Chris Meekins, a healthcare policy analyst at Raymond James, “If Trump wins, you probably want to own Medicare Advantage.” Under the Biden administration, health insurers have faced stricter regulations concerning Medicare Advantage plans, including lower-than-expected payment increases and rigorous quality rating assessments, all while attempts have been made to curtail the program’s costs. Meekins notes that many believe a return to Trump’s administration would alleviate the regulatory pressures imposed by Biden’s administration.

A Trump victory could stimulate stock prices for key players like Humana, which heavily relies on Medicare Advantage and has seen its stock decline by more than 40% this year. Additionally, other major insurers such as CVS and UnitedHealth could also experience a rebound in their share prices.

The Harris Advantage for Marketplaces

Conversely, a Harris presidency could offer a positive outlook for insurers more involved in the healthcare marketplaces established under the Affordable Care Act and for hospitals that serve these customers. One critical issue at play is that the subsidies provided to individuals purchasing insurance through these marketplaces are set to expire by the end of 2024. The Harris campaign has indicated intentions to make these subsidies permanent, while rhetoric from the Trump campaign suggests that continuation may not be a priority.

Over 10.6 million people currently benefit from these subsidies, according to a report from the healthcare policy group KFF. Should these subsidies expire, premium costs would rise significantly, leading many to potentially lose their health coverage. A continuation of these subsidies would particularly benefit Oscar Health, which predominantly offers plans via the marketplaces, and hospitals such as Tenet and HCA Health, which could see a notable drop in insured patients.

Meekins highlighted that states like Texas and Florida, which receive substantial funding through these subsidies, could critically impact the operability of Tenet and HCA, both of which have significant operations in these states.

Big Pharma’s Limited Exposure

For pharmaceutical giants like Pfizer, Johnson & Johnson, and Merck, the implications of the election may be less dramatic than for health insurers and hospital companies. A Trump win might create a more favorable regulatory environment for mergers and acquisitions, potentially benefiting the biotech sector. However, the ongoing debate about the high costs of branded prescription drugs is unlikely to see significant changes under either administration.

Harris has expressed intentions to expand the Medicare drug price negotiation program established by President Biden in 2022. While this initiative aims to reduce prescription costs, it would face challenges without a Democratic majority in Congress. Conversely, Trump’s campaign has signaled a shift away from his previous proposal to align U.S. Medicare drug prices with those in countries offering lower prices.

Conclusion

As the 2024 election approaches, healthcare stocks remain poised for potential volatility based on the outcomes of the presidential race. The implications for insurers, hospitals, and pharmacies differ widely, with a Trump administration expected to benefit Medicare Advantage providers and potentially stimulate recovery for health insurers. On the other hand, a Harris administration may foster a more stable environment for those engaged with the healthcare marketplaces, bolstering the prospects for companies like Oscar Health and hospital operators like Tenet and HCA.

Investors need to navigate this evolving landscape with an understanding of how the election results can reverberate through the healthcare sector, meeting both opportunities and risks head-on. As polls close and results come in, the healthcare market is sure to react, potentially reshaping the financial terrain for many industry players.

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