S&P 500 health care stocks including Centene and Molina Healthcare rose early Tuesday after President Donald Trump expressed openness to a deal with Democrats to avert the expiration of enhanced ACA subsidies. While Trump said that Democrats must first agree to end the government shutdown, Wells Fargo analysts said they now assume the subsidies will survive.
If the subsidies aren't renewed, the Congressional Budget Office has estimated that the ranks of the uninsured will rise by 3.8 million. Health policy researcher KFF says the expiration would raise the average unsubsidized cost of coverage by 114%, to $1,904 from $888 in annual premiums.
Trump Wants 'Great Health Care' Deal
"We have a negotiation going on right now with the Democrats that could lead to very good things," Trump told reporters on Monday, according to a Wall Street Journal report. "I'd like to see a deal made for great health care," he added.
However, in a subsequent post on Truth Social, Trump said he was "happy to work with Democrats on their Failed Healthcare Policies, or anything else, but first they must allow our Government to reopen."
The bulk of ACA Marketplace members reside in GOP-led states, led by Florida and Texas. That's because those states rejected the ACA Medicaid expansion, which provides coverage up to 138% of the poverty level.
Wells Fargo: ACA Subsidy Extension Likely
Wells Fargo analysts raised price targets for a number of S&P 500 health care stocks on Tuesday, building in an assumption that extension of the enhanced subsidies is likely, according to write-ups at The Fly investment news site.
Centene, which has a leading presence on the ACA Marketplaces with 5.86 million members as of June 30, got a price-target hike to 41 from 30 from Wells Fargo, which maintained an equal weight rating.
Wells Fargo analysts also raised price targets for Elevance Health (to 412 from 330), Molina Healthcare (231 from 198) and UnitedHealth Group (400 from 267), keeping overweight ratings on all three S&P 500 names.
Oscar Health, founded in 2012 partly to capitalize on ACA-fueled market shifts, got a 14 target from Wells Fargo, up from 10, and an underperform rating.
S&P 500, CNC, UNH, OSCR
Centene rose 3.7% in early Tuesday stock market action, while Oscar, pretty much a pure play on the ACA Marketplaces, jumped 3.7%.
Among other S&P 500 names, Molina rose 2.6% and UnitedHealth 1%.
The S&P 500 rose 0.15% early Tuesday, aiming to extend its winning streak to eight sessions.
The S&P 500 added 0.4% on Monday, finishing at a new closing high and up 14.6% for the year.
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