Part of investors' worries surround the uncertainty over the potential impact of a widespread Covid-19 outbreak in the United States. But that's not all that's worrying investors.
Part of investors' worries surround the uncertainty over the potential impact of a widespread Covid-19 outbreak in the United States. For insurers, it will almost certainly result in higher costs as Americans who get sick seek medical care.While health officials say it's now a matter of when we'll see a major outbreak, analysts say it's still too soon to calculate how a major outbreak could impact health care earnings.
Piper Sandler analyst Sarah James said she's not modeling for coronavirus in her company estimates yet. At this point, this week's sell-off in hospitals and health insurer stocks has been overdone. "The care that people are getting, who have is on military bases, and not being run through their health insurance," James said, adding that if the Covid-19 were to become as widespread as a bad flu, "it's not really that impactful for earnings."
During a strong flu season, higher emergency room use and hospitalizations can lead to an increase of 10 to 20 basis points in increased medical care spending, said J.P. Morgan analyst Gary Taylor. Yet, he said, that fractional increase doesn't materially impact the bottom line.
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