Ending private health insurance has been one of the rallying cries of Elizabeth Warren's presidential bid and her rise in the polls has made health care investors nervous.
Yet the week after the leading Democratic contender detailed how she'd pay for her Medicare for All plan, prompting widespread debate, investors are seemingly to shrugging off the news altogether.
The S&P 500 Managed Care index rose more than 3% last week. Six straight weeks of gains have the large-cap health insurance sector up more 19% for the fourth quarter.
Part of the move higher follows strong third-quarter earnings reports over the last few weeks from the major health insurance giants UnitedHealth Group, Humana, Centene, Cigna and Aetna parent CVS Health.
It marks a big change in sentiment, after the sector sank 12% over the second and third quarters, when Warren's poll numbers began to rise and the White House and Congress seemed poised to introduce regulatory curbs on insurers' pharmacy benefit units.
Analysts say the sector was due for a rebound, but the reprieve in the Medicare for All fear factor is likely temporary.
"As regards potential stock volatility on the political risks and the elections, we still see a binary setup for November 2020," BMO Capital Markets analyst Matt Borsch wrote in a note to clients, adding that a Warren win would pose the biggest risk for insurers UnitedHealth and Humana which are the leading issuers of private Medicare Advantage plans. Warren calls for eliminating private plans.
"While we don't see a lot of downside risk for Medicare Advantage, the change in regulatory approach could still be meaningful," Borsch said.
"We're looking at Medicare for All as an existential threat to the insurance industry," said Deep Banerjee, lead insurance credit analyst at S&P Global Ratings, but he adds that a move to single payer would also have a big impact on physicians, hospitals and other health care providers.
"It is not just insurance reform, it's also payment reform because you know, if you look at how (Warren) will achieve a system like that you would have to cut payments to providers," explained Banerjee.
Warren maintains her plan would not negatively impact the actual delivery of medical care. She says she would expand the "value-based reforms enabled by the Affordable Care Act," such as bundled payments for in-patient and post-operative care, and encourage better coordination of treatment to try to bring down costs.
"On the one hand, Medicare for All would offer opportunities to use payment incentives to better coordinate care," said Larry Levitt, KFF executive vice president for health policy, but he adds, "on the other hand, a single public insurance plan would close off opportunities for individual private insurers to experiment with different approaches."
"We've seen some good things in Medicare with the ACA work that's been done, certainly," said Tracy Watts, senior partner and health policy leader at benefits consulting firm Mercer, "but I feel like the employers are kind of that independent voice that drives the market… they drive all of this great change."
Under Warren's plan, large employers would pay a health-care tax rather than fund workers' health coverage directly, giving up control over the design of benefits.
"That would be an impractical solution that would stifle innovation," argued venture capitalist Annie Lamont about Medicare for All plans in general, at the HLTH conference in Las Vegas last month. The co-founder of venture firm Oak HC/FT said the self-insured employer market has been more open to new digital health models.
Telemedicine has been a prime example. Large employers and private insurers have embraced the technology for years, and for 2020 many are looking at integrating video visits with primary care and mental health benefits for patients with chronic conditions. Traditional fee-for-service Medicare has been slower to reimburse those services.
"I've always viewed what we do as the most bipartisan part of health care—lower costs, higher quality and greater access," said Hill Ferguson, CEO of telemedicine provider Dr. on Demand.
While he's not advocating for a single-payer system, Ferguson believes at this point digital health firms could make the shift to Medicare for All and help ease the looming shortage of doctors under any new system at a competitive cost.
"I think if Medicare for All were to materialize, it would inflict a lot of pain on insurers, obviously, but it could actually help companies like ours that would be required to provide access to more people," he said.
"What's not going away is chronic conditions… whether you're a Republican or Democrat you're equally affected," said Glen Tullman, chairman of Livongo Health which provides digital management for chronic disease.
"You're going to need consumer-first digital health solutions," even under single payer, Tullman said.
The move away from employer-based health insurance to Medicare for All could actually strengthen the market for direct-to-consumer services, according to Zach Reitano co-founder and CEO of Ro, the parent company of online men's health service Roman.
"The cash market is where innovation increases and prices come down," Reitano said, noting that costs for services like Lasik eye surgery and cosmetic procedures continue to come down because they're not covered by health insurance and patients pay out of their own pockets.
"We see people vote with their feet first," when they pay cash, he said.
The first votes in the Democratic presidential race are just over two months away, beginning with the Iowa Caucuses on February 3 and the New Hampshire primary on February 11.
But over the next few weeks as impeachment proceedings take center stage in Washington, the Medicare for All debate will likely move to the back burner, and along with it sweeping drug price bills being debated in Congress. That could help keep investors positive on health care stocks near-term.
Correction: An earlier version of this story incorrectly described Oak HC/FT as the host of the HLTH conference in Las Vegas. HLTH is a separate organization.