Shares of UnitedHealth Group (NYSE:UNH) were soaring 12.5% as of 3:52 p.m. EDT on Tuesday. The big gain stemmed from two factors.
First, the health insurer's stock benefited from investors' enthusiasm about a potential $2 trillion stimulus bill that could boost the U.S. economy during the coronavirus crisis. Second, UnitedHealth Group announced that it was opening a special enrollment period for some of its existing commercial customers as well as reducing prior-authorization requirements. These measures are being taken to improve access to care in response to the COVID-19 pandemic.
UnitedHealth Group is highly unlikely to be a direct recipient of any federal money from the response to the pandemic. But the company could benefit indirectly as businesses and individuals affected by the health crisis have more money to pay their premiums.
The more important angle with the potential stimulus legislation for UnitedHealth Group, though, is that it bolsters optimism among investors who have become shell-shocked in recent weeks. Any positive news is welcome news. And anything that could help the U.S. economy recover more quickly should be good for every industry, including health insurance.
UnitedHealth's moves to open a special enrollment period for some customers and lower administrative requirements could actually cost the company in the short run. But putting people over profits could pay off over the long run through increased customer retention.
The stimulus package isn't a done deal yet, although it seems likely that lawmakers will reach an agreement relatively soon. However, the legislation probably won't eliminate the high volatility that healthcare stocks such as UnitedHealth Group have experienced in recent weeks. As the number of COVID-19 cases in the U.S. rises, health insurance stocks could drop even more than they have.
This is only a temporary problem, though. Strong companies like UnitedHealth Group should survive the current crisis and thrive when it's over.