The largest health insurance companies saw mixed movements Wednesday morning following Donald Trump's surprising win of the presidency thanks to promises that the Affordable Care Act will be repealed and that the government will be less involved in business.
"[We predicted that] if you get a Trump sweep it would be a big positive for the space," analyst Nadia Lovell of JPMorgan said by phone Wednesday. "Trump has been very vocal about repealing ACA. People are concerned about what it means for the space."
Analysts noted that thanks to a Republican House, Senate and presidency, President Barack Obama's signature legislation, the Affordable Care Act, will likely be repealed in full or at least in part.
"Trump win, coupled with GOP majorities in Congress, opens the door to the ACA's repeal," Jefferies analyst Brian Tanquilut wrote in a note.
Ana Gupte, analyst at Leerink agreed.
"We expect that at least a partial 'Repeal and Replace' of ObamaCare is legislatively possible, particularly on key provisions related to the individual markets such as subsidies and the individual mandate," she wrote in a note.
And the politicians that won races are backing up predictions. Sen. Rand Paul (R-Ky.) said Wednesday morning that Congress would "spend the first month passing the repeal of Obama regulations" on MSNBC. Meanwhile Speaker of the House Paul Ryan promised to stand with Trump Wednesday morning.
As far as the public can tell, Trump and Republicans in Congress would likely agree on a repeal of the Affordable Care Act. Analyst Terry Haines of Evercore called this a "fortunate political coincidence," noting that Trump and establishment Republicans rarely agreed on major issues.
Things, though, are not as clear as they could be. Nobody knows how or if Trump would chose to replace the Affordable Care Act. And with millions of Americans finally insured, this is likely to be a struggle, even with a fully Republican House and Senate.
"Not only repeal, but we have no idea what will replace it: With the enmity between Trump & Ryan, we can't be sure that even the weak Congressional health plan will be the replacement for exchanges/Medicaid expansions," Mizuho analyst Sheryl Skolnick wrote in a note.
Still, though, it's important to note that there's a lack of clarity as to what will actually happen once Trump and the Republican majority takes office. Many recommend staying neutral on the healthcare insurance stocks until more information is received.
"Even though it is yet seen if he will be able to claw back an entitlement as big as Obamacare, the fear itself will weigh on valuations and, as a result, we now believe these stocks can outperform until we receive clarity on his true intentions," Mizuho analyst Ann Hynes wrote in a note.
Given Republican's traditional views on business, it's likely that the government could step out of the way and allow the mega mergers between Aetna-Humana and Anthem-Cigna pass, despite major antitrust concerns. However, like many laws and regulations coming down the pipeline, the outcome remains unclear.