Republican Party Win in US Election Could Ease Key Pressures in Managed Care Industry

With the Republicans winning key federal electable bodies (White House and Senate at the time of writing) in the US election, pressure on certain parts of the managed-care industry could ease a bit, while other areas would still face scrutiny, but at this point, we’re not changing any fair values. Positively, the Republicans’ leadership could mean less pressure on Medicare-focused insurers like Humana HUM and CVS Health CVS, while antitrust scrutiny also could dissipate. Negatively, Medicaid and the individual exchanges—two Centene CNC strongholds—could see less support under the Republicans. Also, we still view pharmacy benefit management transparency as a key concern for both major political parties, but we expect potential legislation to be manageable for top-tier players like Cigna CI, CVS, and UnitedHealth UNH.

Medicare Advantage is currently facing many regulatory challenges under the Democratic Party leadership, including risk adjustments down toward traditional Medicare rates and weak star ratings that promise to constrain future bonus payments. However, the switch to Republican leadership could ease those pressures a bit, given the Republicans support these privatized plans for senior citizens. At the very least, we would expect regulators to stop turning the screws so hard on Medicare Advantage beyond current risk-adjustment initiatives that are projected to be completed in 2026, which would bode well for M&A-focused insurers like Humana, CVS, and UnitedHealth.

Also, the Republican victories could grease the wheels of future M&As in the channel, which has almost been halted under the Biden administration. The potential merger of Cigna and Humana could have a better chance of success than under the Democrats, though we still see increasing claims concentration in the PBM industry as a concern. Also, the combination of medical insurance and healthcare services firms may face less scrutiny, which could bode well for UnitedHealth’s diversified business model and any imitators.