Due in large part to the death of one of its senior executives, UnitedHealth Group is causing the Dow Jones Industrial Average to plummet.
The Dow experienced its worst losing run since 1978 on Tuesday, dropping 267 points and finishing 0.6% down following nine days of falls. Since CEO Brian Thompson was shot and died in New York City on December 4, the decline has been accompanied by a sharp decline in the parent company’s shares of UnitedHealthcare. Since then, the stock of UnitedHealth Group has fallen by about 20%, while the index has decreased by 3.4%.
The stock values of the biggest health insurance companies in America, such as Humana, Cigna, and CVS Health, which owns Aetna, have also fallen recently. UnitedHealth Group was responsible for 804 of the 1,564 points that the Dow had dropped since December 4 as of Tuesday’s closing bell.
With losses more than double those of Goldman Sachs, the second-worst performance in the 30-stock index this month, UnitedHealth Group is also the worst performer. The decline in the index has also been attributed to other significant companies whose stock is included on the Dow, including Nvidia, Sherwin-Williams, and Travelers.
In contrast, the Nasdaq Composite has risen by almost 4.5% in December, while the S&P 500 is circling break-even for the month. Near-all-time highs for both.
Since UnitedHealth Group is the sole health insurer, its decline has had a bigger effect on the Dow, which is a price-per-share weighted average, than the S&P and Nasdaq, which are weighted by market value. At $485 per share, the stock is the second most expensive on the index, although it is just the 17th largest stock in the S&P 500 in terms of market value.
Since Thompson was attacked, UnitedHealth Group’s market worth has dropped by more than $110 billion. Its competitors have also suffered significant losses. CVS has lost almost 25% of its value, wiping away over $19 billion; Cigna has lost 20% of its value, wiping out over $20 billion; and Humana has lost 19% of its value, wiping out nearly $7 billion.
Since December 4, the largest exchange-traded fund that follows the health care industry as a whole, including non-insurer companies, has down more than 5%. Once more, with double-digit losses ranging from 18% to 25%, CVS, UnitedHealth Group, Cigna, and Humana are the worst performers.
Despite Merck’s 1.5% decline this month and the more than 5% declines in shares of pharmaceutical companies Johnson & Johnson and Amgen, other health firms in the Dow are holding up quite well.
Investors’ reactions to public indignation at the health care system following the killing, which some sector leaders have attempted to rectify, are mostly reflected in the downturns.
While acknowledging that “the health system does not work as well as it should, and we understand people’s frustrations with it,” UnitedHealth Group CEO Andrew Witty last week condemned “the vitriol that has been directed at our colleagues who have been barraged by threats” in an opinion piece published in the New York Times.
“No one would design a system like the one we have,” he continued, referring to it as “a patchwork built over decades.” The insurance behemoth is committed to “helping make it work better.”
Since the early 1980s, health insurers have gotten bigger as the expense of medical treatment has increased more quickly than the rate of inflation. UnitedHealth Group outperformed its competitors with sales of almost $371 billion in only the previous year. Humana made $106 billion last year, while another insurer Cigna earned $195 billion.
Meanwhile, pharmacy benefit managers—third parties that oversee prescription programs for large insurers—are set to be “knocked out” by President-elect Donald Trump. The fact that some of the biggest insurance corporations, such as UnitedHealth Group, Cigna, and CVS, also control some of the largest of these firms has led to considerable criticism of those businesses.
Without giving specifics, Trump stated to reporters on Monday that he wants to bring costs “down at levels that nobody has ever seen before.” “These middlemen are wealthy, but I don’t know who they are,” he remarked.
