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Sign of rising investor concern over regulatory health care landscape, shares of UnitedHealth Group Inc. fell Tuesday, although the company posted a first-quarter profit and revenue higher than expected and strengthening its earnings outlook for the year.
The stock of the health insurance giant
A H, -4.01%
rose 3.4% in intraday trades a few moments after the opening bell, and further down throughout the session, as did the company's peers, while CEO David Wichmann adopted a combative position vis-à-vis the "health insurance for all" proposals unveiled by some Democratic presidential candidates.
"The global disruption of US health care discussed in some of these proposals would certainly jeopardize the relationship people have with their doctors, destabilize the country's health system and limit the ability of clinicians to practice medicine optimally" .
Stocks fell 4.5% in trading in the afternoon, which is enough to bring down the Dow Jones Industrial Average index. The drop of $ 10.26 had the effect of reducing by approximately 70 points the price of the Dow, up 82 points.
Analysts pointed to the disparity between the earnings report and the response of equities to what they call the "Medicare cost premium for all".
"We believe the market attributes a disproportionate probability that a Medicare proposal for all will become a reality," Cowen analyst Charles Rhyee said Tuesday in a note to customers.
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"The problem (…) is that investors make many assumptions about unpredictable future events, all of which must fail for Medicare for All to be a possibility," he said.
It's unlikely that all these pieces will be in place, Rhyee said. For such a bill to pass, a presidential candidate on the far left would be forced to win the White House, Democrats should win at least 11 seats in the Senate and retain a majority. in the House, he noted. And this is just the beginning – not all Democrats would support the bill. Such a bill could provoke strong resistance from hospitals and some doctors, who would probably be less well repaid under such a proposal.
"In our opinion, Medicare for all fails the Occam razor test," he concluded.
In other words, the UnitedHealth stock price has fallen, not necessarily because the company is doing something wrong, but because investors are responding to discussions about changes in the regulatory landscape – more recently, the possibility renewed Medicare for all.
And CEO Wichmann tried to address these concerns, but perhaps he fueled them by recognizing the threat.
"The global disruption of US health care discussed in some of these proposals would surely jeopardize the relationship people have with their doctors, destabilize the country's health system and limit the ability of clinicians to practice medicine at its best" said Wichmann, according to Wichmann. to a transcription provided by FactSet. "And the inherent cost burden would surely have a severe impact on the economy and jobs, without fundamentally increasing access to care."
Do not forget that his comments come after the stock last week suffered the worst weekly return since September 2009, highlighted by a 9.3% drop on two days in a row by Senator Bernie Sanders' unveiling. his "Medicare-for-all" plan. .
Wichmann seems to want more, saying that universal coverage could be "substantially" achieved through "existing public and private platforms". He said that the "innovative and proven" solutions of the private sector can achieve the goal of protecting everyone in terms of access, choice and coverage. , at a "reasonable cost", although he did not provide details.
His tone seemed to go against the more cooperative and constructive stance he had adopted three months ago. At a conference call that followed the fourth quarter results on Jan. 15, Mr Wichmann said the country "was entering a wave of early health care innovation" that it Expects UnitedHealth to "help direct".
At the time, he said, regardless of the political sentiment, "there is a liberal or conservative administration," health care products are still in demand and UnitedHealth was in a "unique" position To benefit from it.
Michael Newshel, an analyst at Evercore ISI, said investors "feared the fear itself" in a note sent Tuesday to customers.
"UNH has continued to show a consistent level of outperformance and is currently tracking short-term policy changes such as drug rebates, while the MCO fundamentals remain strong," he said. declared. "But the overhang of Medicare-for-All remains the dominant narrative."
The UnitedHealth peers were also affected by the surplus, as the most important factors of decline in the S & P 500 index were all health service providers. Shares of HCA Healthcare Inc.
HCA -10.00%
Cigna Corp. sank 10%
THIS, -7.80%
paid 7.5%, Anthem Inc.
ANTM, -6.75%
lost 7.2% and Humana Inc
HUM, -7.44%
fell 6.9%.
UnitedHealth shares have fallen 12% since the beginning of the year, while the Dow Jones Industrial
DJIA, + 0.26%
gained 13%. The S & P 500
SPX, + 0.05%
gained 16%.
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