Healthcare stocks got a bit of good news when the Supreme Court gave the green light to Obamacare’s individual mandate nearly two years ago, clearing the way for them to rake in the profits from insuring millions of young, healthy individuals who by law must now carry health insurance.
Unfortunately for healthcare stocks and their investors, new regulations threaten to turn that dream into a nightmare — at least in the short term.
As managed care giants have cut back on providers to save money, consumers have cried foul. Federal regulators appear poised to answer by forcing insurance companies to broaden their provider networks — a move that could erode their earnings in the short term and send healthcare stocks like Aetna (AET), WellPoint (WLP) and UnitedHealth Group (UNH) lower.
A recent report by McKinsey & Co. found that 70% of the new Obamacare plans offer narrow networks that could come under fire by the new regulations.
Here is the outlook for the top three healthcare stocks if the changes take effect: