The steep drop in health insurance stocks continued, with UnitedHealthcare (UNH) in focus. The murder of CEO Brian Thompson on Dec. 4, 2024, sparked an outrage against the sector. Those firms now need to handle the anger shared on social media.
Health insurance firms will need to review their overall excess profit margins. If denial rates are too high, they would need to charge insurance holders a lower premium.
Governments are also considering reform for PBMs, or pharmacy benefit managers. CVS Health (CVS), Humana (HUM), and Cigna (CI) are at above-average risk if the government forces them to divest their PBMs.
Deutsche Bank analysts think that CVS could lose more than half of its operating earnings on a PBM divestiture. Ironically, earnings for UNH may not fall by much. It would lose no more than $200 million out of its $30 billion in operating earnings.
Buy the Dip
Investors may consider starting a small position in CVS stock after it fell below $50. Similarly, Elevance (ELV) is attractive, now that it trades at a low for the year. The firm has a policy change that will go into effect on Feb. 1, 2025. Anthem members in New York, Connecticut, and Missouri will have an amount limit for anesthesia and anesthetic services.
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