Healthcare stocks were rising Wednesday after Democrats swept the midterm elections to gain control of Congress next year. It's a nod from Wall Street that appeared to recognize the party's messaging on making healthcare more accessible and affordable for more people.
Among health insurers, companies serving Medicaid and Affordable Care Act $(ACA)$ markets -- both government-supported programs that Democrats have vowed to protect -- were faring especially well.
Centene and Molina Healthcare, big operators in state Medicaid programs, were each up more than 7% Wednesday. Oscar Health, focused on ACA plans, gained mored than 8.5% during the session.
Hospital operators also posted large increases. HCA Healthcare, Universal Health Services, and Tenet Healthcare all climbed above 9%.
Baird analyst Michael Ha said Wednesday the "bull case" was materializing for those three spaces -- Medicaid, ACA, and hospital groups. A Democratic sweep looked to be priced into those stocks before the final results, Ha said, and mid-single-digit increases weren't unexpected.
Not every large insurer was benefitting as much Wednesday. UnitedHealth Group shares were up about 1%, while Humana stock gained about 0.4%. The insurers are two of the largest in the privately-run Medicare Advantage market for seniors. Government spending on MA plans has attracted bipartisan scrutiny in recent years, a trend that could carry over in a Democratic Congress.
Ha also pointed to a potential rise in Medicare for All discussions in the new Congress that could have "negative optics" for Medicare Advantage plans, and for managed care and healthcare facilities overall. The concept of Medicare for All is often associated with a form of universal health coverage that would dent private industry.
"While certain candidates have reintroduced Medicare For All rhetoric, we currently believe the odds of successful MFA passage/ implementation as low, though headline risk may pressure the entire group," Ha wrote in a Wednesday research note.
Large drug companies also saw gains Wednesday, with the NYSE Arca Pharmaceutical Index up nearly 2.4%.
Jared Holz, healthcare sector specialist at Mizuho Securities, said he would expect a pullback in large-cap pharma as time goes on, given Democrats' continued desire to reform prescription drug pricing.
"Our view is that drug prices as a broader topic picks up with Democrats now having control of Congress as many major political figures across the party have expressed dissatisfaction with drug price reform," Holz wrote in a Wednesday note.
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