UnitedHealth Group's CEO spooked healthcare investors this week after predicting plans like "Medicare for All" would lead to a "wholesale disruption" of America's health system, weighing down shares of managed care and hospital companies.
Many 2020 Democratic presidential hopefuls have backed some version of expanding Medicare, which would broaden government's role in healthcare, potentially eliminating private insurance under some plans and cutting provider reimbursement.
Despite beating Wall Street analyst expectations for the first quarter, UnitedHealth's own shares fell 4% Tuesday. Anthem, the nation's second-largest insurer, saw shares fall almost 7% Tuesday, Humana's slid more than 7% and Cigna's plummeted by nearly 8%. Shares in most companies continued to fall in late morning trade Wednesday.
Hospital operators were not immune to the selloff either, with HCA shares diving 10%. Health systems have ramped up lobbying against Medicare for All proposals since the latter half of last year.
Market volatility is not unusual ahead of an election, particularly in the healthcare sector, which has been an especially contentious topic of national debate since 2007. But the pressure on stocks comes more than a year before the 2020 presidential election and well before the field of candidates has been whittled down.
David Windley, an analyst with Jefferies, wondered why investors were shocked by UnitedHealth's comments during Tuesday's call with investors, asking: "How could people be surprised by that?"
On the investor call, UnitedHealth CEO David Wichmann warned moving to a Medicare for All type system would "surely jeopardize the relationship people have with their doctors, destabilize the nation's health system and limit the ability of clinicians to practice medicine at their best."
"The inherent cost burden would surely have a severe impact on the economy and jobs — all without fundamentally increasing access to care," he said. Universal coverage can be achieved with "existing public and private platforms," he added.
Payer stocks took an overall hit last week as well, when 2020 candidate Sen. Bernie Sanders, I-Vt., revealed his Medicare for All plan.
Once seen as outside the mainstream, Sanders' plan is now sponsored by four other presidential candidates: Sens. Elizabeth Warren of Massachusetts, Cory Booker of New Jersey, Kamala Harris of California and Kirsten Gillibrand of New York.
Sanders' plan goes farther than other proposals on the campaign trail to expand the public option or create a Medicare buy-in. It would essentially eliminate the private insurance sector.
Sanders took aim at industry profits when releasing the plan. "In my view, the current debate over Medicare for All really has nothing to do with health care," he said. "It's all about greed and profiteering. It is about whether we maintain a dysfunctional system which allows the top five health insurance companies to make over $20 billion in profits last year."
The latest Kaiser Family Foundation polling from March showed that 56% of overall respondents and nearly 80% of Democrats favored a single-payer health plan in America. The poll also showed a majority of Republicans strongly oppose a national health plan.