Here’s Why UnitedHealth, Humana, and Cigna Soared in November

What happened

Shares of America’s largest healthcare providers UnitedHealth Group (NYSE: UNH), Humana (NYSE: HUM), and Cigna (NYSE: CI) rose at least 10% in November, according to data from S&P Global Market Intelligence. The finalization of a non-compliance fee that’s hardly significant for any of these companies provided the lift that raised shares of UnitedHealth, Humana, and Cigna 10.8%, 16%, and 12%, respectively.

So what

On Nov. 3, 2019, the Trump administration delayed implementing rules that require hospitals to disclose the fees they receive, in order to also include health insurers. The Trump administration’s new service-fee disclosure rules were expected to be a big problem for insurers and hospitals, which like to keep the discounts they negotiate secret.

Image source: Getty Images.

Shares of the insurers rose sharply after the Department of Health and Human Services (HHS) finalized the rule. That’s because the maximum civil monetary penalty that HHS is allowed to impose for non-compliance is a measly $300 per day per hospital. Even with the delay of implementation in order to include UnitedHealth, Cigna, Humana, and their peers in the new rules, it doesn’t look like there will be any monetary consequences for insurers that refuse to comply.

Now what

In 2017, a patient who went from one hospital in the metro-Los Angeles area to another for a hip replacement could save end payers more than $60,000. While there may be some providers that are willing to compete on pricing if the transparency law succeeds, the vast majority would lose heaps of revenue.

Hospitals have until Jan. 1, 2021 to begin displaying price information for services, but the chances are very slim that we’ll all get to make informed decisions about where to take our business. In December, hospital groups sued to block the Trump administration from implementing the new transparency rules, citing first amendment rights.

If hospital group lawsuits don’t win immediately, the appeal process will almost certainly push the implementation deadline further down the road. That means the impressive earnings growth that has been pushing shares of UnitedHealth and its peers higher and higher in recent quarters will most likely continue in the years ahead.

10 stocks we like better than UnitedHealth Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and UnitedHealth Group wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of December 1, 2019

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

You May Also Like

About the Author: Over 50 Finance