It was mostly smooth sailing for health insurers last year, but 2020 could get choppy. Insurer earnings growth is expected to get dinged by the return of a fee that supports the Affordable Care Act. And investors may become alternately rattled or encouraged by the U.S. presidential race, as they have in the past. The five publicly traded companies that draw most of their revenue from insurance all grew profits in 2019, and investors responded.
Shares of UnitedHealth Group, Anthem, Humana and Molina reached record prices last year even though the sector trailed the broader market. Moody’s Senior Analyst Dean Ungar expects earnings growth to be slightly lower in 2020 because of the ACA fee and the rising cost of things like specialty drugs. He also noted that gains some insurers have made from coverage sold on the ACA’s insurance exchanges will level off. Then there’s politics. Investors may get nervous if candidates who want to overhaul the U.S. health care system do well — and they may get excited if those ideas fade or the president looks headed for another term.