Kelly Evans co-hosts CNBC's Power Lunch
David A. Grogan | CNBC
It's pretty shocking that the health insurance name is being traded. Centene (a major Obamacare and Medicaid insurance company) is down 57% this month. The stock price reached 2014 levels after earnings this morning. Molina is small, but has a high Medicaid concentration, but a 48% decrease. Humana, which was traded for $550 three years ago, is currently a $235 share.
And it doesn't stop there. This lies above the well-known issue that plagues UnitedHealth, the nation's largest insurance company. These stocks fell 56% from their all-time high in November last year. Yesterday, the company confirmed it is collaborating with a federal investigation into Medicare claims practices.
While it may be appealing to dismiss UNH's issues as corporate-specific, it doesn't explain why rival Elevate (formerly the national anthem) fell 29% this month, 50% below the all-time high in September. “This is the worst thing the healthcare sector has ever traded,” lamented Mizuho strategist Jared Holtz, pointing out this is the third year in a row that the sector has performed the S&P 500 more than 20%. “Giotto,” he said. “It's just my skills.”
So, what is happening in the world? Is it a coincidence that the industry is seeing a decline in scale that is rarely seen outside of the financial crisis and the bubble pop market? These are not goofball startups, memokines, or over-utilized financial institutions, and are rarely overvalued. They are the large, highly regulated, utility-style pillars of the US healthcare system.
If you have a general thread, it's basically that more people are currently using health insurance after delaying use during the pandemic. Add that federal investigation to the Centers for Benefits, such as Medicare and Medicare Advantage. And one expert I recently discussed recently said that hospitals are now using AI to approve and pay patient procedures to insurers.
With Medicaid and Obamacare, you may now be pulling back subsidies and support. GOP's Megabill is expected to “significantly reduce” the number of people on Obamacare next year, according to the Wall Street Journal. So this month it was a huge hit with these insurance companies.
Centene's stock reversed this morning after CEO's revenue call CEO said he believes he will “re-refine the market business” for “meaning improvements to margins in 2026.” But that of course means price increases for customers on the other side. And it's unclear how well it will be, as health insurance costs have been running almost triple overall inflation over the past 20 years.
Still, do patients who need health coverage really need to head elsewhere? That's precisely because of their utility-like nature, investor Bill Smeade told us on Wednesday that he began adding UnitedHealth to his US Value Fund. Chris Grisanti of Mai Capital Management is also the buyer of that name.
“The government needs these businesses to exist,” Smeade said Wednesday. And that's probably true. But to put that differently, has borrowing that horrible phrase, as my colleague Brian Sullivan quit, has become “too big to fail”?
While taking advantage of maternity leave coverage, I ponder it. See you one day almost in mid-November, God is pleased!
Kelly
Twitter: @kellycnbc
Instagram: @RealKellyevans
