Podcast Center
Video Center
Webcasts
Resource Center
Events
August 24, 2015 at 11:48 AM
The stock market is always going up and down, and it’s pretty common for broad market indices to fall one-third or more in a year, then bounce right back up once the scaredy-cats have put their portfolio money in their mattresses.
See also: Hour of panic as GE plunged 21 percent and markets flirted with abyss
On the one hand, of course, sometimes stock markets go down, and stay down, for years. It’s always possible for them to go down and stay down forever. “Past performance may not be indicative of future results.” For real. The Roman Empire, for example, went through a correction that, arguably, lasted for more than 1,000 years.
If we all end up living in caves, that would have an obvious, noticeable and hard-to-plan-for effect on the U.S. health insurance market and Patient Protection and Affordable Care Act (PPACA) implementation. In that scenario, “health care delivery” might have more to do with trying to remember how the old veterinarian did things in The Walking Dead than with Center for Consumer Information and Insurance Oversight (CCIIO) guidance.
But, anyhow, on the other hand, suppose we go through a normal stressful market slump. Why would that be of interest to health insurance agents, brokers, insurers and policymakers?
Big publicly traded companies get cash directly from investors only before they “go public,” when they are getting cash from private-equity firms, venture capital firms, parents, aunts, uncles and clueless credit card issuers; when they issue bonds, or “sell stock to the public” through initial public offerings (IPOs); and if and when they sell more stock or bonds later.
But, if and when investors sell a health insurer’s stock to one another through the New York Stock Exchange, Nasdaq or some other market, they establish what they think the share price ought to be. A publicly traded company knows that, as long as it’s careful and makes transactions with its stock that investors like, it can use the value of its stock as a form of currency.
Managers of some nonprofit health insurance companies are hemmed in by laws and regulations that keep them from selling the companies to the big, publicly traded insurers. But high stock prices at the publicly traded health insurers may help smaller, nonprofit or closely held insurers with the legal ability to sell their companies to the big, publicly traded companies, by giving customers, lenders and investors confidence that, if problems cropped up, the smaller plans could get some cash by selling their assets to the big plans.
