Healthcare stocks have lost their defensive appeal and are feeling rather ill for the past few weeks. Shares of healthcare companies, United Health Care and Humana have dropped significantly since the Obama administration outlined a healthcare reform agenda aimed at cutting $175 billion in payments over 10 years to private insurers through the Medicare Advantage Program. Reduction in payments will also affect other healthcare subsectors such as prescription drug manufacturers and hospitals. Medicare Advantage plans are government plans in which patients receive their benefits through a private health insurer and not a traditional Medicare benefit. Medicare is the U.S. government's health plan for the elderly, with nearly 11 million seniors receiving medical and drug benefits. Among the biggest players servicing Medicare Advantage plans are UnitedHealth with more than 1.7 million beneficiaries followed by Humana which offers about 1.4 million members health benefits.
The S&P Healthcare Index which tracks pharmaceutical and healthcare companies has been beaten down as it shed 12.8% in February and began March further to the downside, as it fell 4.7% on Monday.
87% of the S&P Healthcare Index components were down for February, led by Humana Inc, UnitedHealth Group and Conventry Health Care each shedding 37.6%, 30.6% and 23.9%, respectively. Furthermore, roughly 83% of the components are also down for the year, with Humana and KingPharmaceuticals down ~46% and ~36% year to date, both breaching their 52-week lows on Monday. See the table below for 20 biggest healthcare stock losers YTD.