The 2020 election is coming. And health insurers are worried.
A groundswell of support for Medicare for All among prominent Democratic presidential contenders has spooked the industry, with some candidates professing the private health insurance sector may (and even should) eventually be tossed into the dustbin of history.
Sen. Bernie Sanders—author of a comprehensive Medicare for All bill—has never shied away from a fight with large corporations, and universal health care has long been one of his hobbyhorses. But candidates occupying a more centrist space in the Democratic Party, such as Sens. Kamala Harris, Kirsten Gillibrand, and Cory Booker, have all cosponsored Sanders’s legislation.
The bulk of the Sanders bill would be paid for by a 7.5% payroll tax on employers and 4% from workers’ paychecks. The current system of Medicare and Medicaid would be scrapped and replaced with a significantly more generous program. Everyone in the United States would be covered, no opt in or out.
The big catch: You’d lose your current employer plan. “The Medicare for All bills proposed by Sanders … would effectively eliminate the role of private health insurance providers,” Larry Levitt, senior vice president for health reform at the nonpartisan Kaiser Family Foundation, told Fortune in an interview. “The idea of eliminating an industry and companies that are this large is unprecedented.”
Under the plan, private insurers would be banned from competing with government coverage, relegating them to the role of selling supplemental insurance—table scraps compared with the $600 billion feast that private insurance is today.
Democratic politicians are finding themselves increasingly comfortable with that situation. Harris told CNN’s Jake Tapper, “Let’s eliminate all of that,” referring to the insurance industry (she later softened her stance). Gillibrand has called it an “urgent goal.”
Wall Street is taking that possibility seriously. The S&P 500 Managed Health Care Index, comprising many health insurance stocks, fell 10% between Feb. 26, when House Democrats introduced their own Medicare for All legislation, and March 7. By comparison, the index was up nearly 15% in the 12 months preceding the bill’s introduction.
It’s hard to overstate the magnitude of such an overhaul. UnitedHealth was ranked fifth on the 2018 Fortune 500 list, grossing more than $226 billion last year; Anthem and Aetna (premerger with CVS) were both in the top 50. Those three companies alone employed more than 364,000 people in 2017.
The prospect of all of that simply vanishing has the industry preparing for a fight. Last year the nation’s largest hospital, pharmaceutical, insurance, and doctors’ lobbying groups formed the Partnership for America’s Health Care Future (PAHCF), an organization dedicated to market-based health care reforms—and pushing back on the specter of Medicare for All.
“We want to build upon the system that’s working and fix what’s wrong,” Lauren Crawford Shaver, PAHCF’s executive director, told Fortune in an interview. “In many of these Medicare for All proposals, it’s very unclear what they actually want to do. They’re looking to start all over. Why not pause for a second and improve what we have?” Shaver points to polls showing that Americans’ support of Medicare for All, which is 71% if told it would guarantee health care as a right, falls to 37% when told it would eliminate private health insurance.
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But insurers for the most part haven’t offered up a whole lot of suggestions for fixing the current private system and feel little need to, according to KFF’s Levitt. “Right now, I’d expect health insurers to just trash the idea of Medicare for All without offering an alternative,” he said.
That could be a miscalculation. The cost of private insurance has been rising consistently, and employers have increasingly shifted costs onto their workers—while wages have largely not kept pace.
Those financial realities and the frustrating, jigsaw nature of U.S. health care are fueling the enthusiasm for Medicare for All.
The Sanders bill has a zero probability of passing before 2021. But in a scenario where Democrats win the White House and total control of Congress in 2020 (and nix the Senate filibuster), it’s not in the realm of fantasy that some form of Medicare for All could pass.
Falling short, Democratic leaders would still be likely to push for expanded access to Medicare (by lowering the enrollment age to 55, for example).
If insurers can’t offer a compelling alternative to calm the swell, they could soon find themselves fighting against an industry-drowning tide.
A version of this article appears in the April 2019 issue of Fortune with the headline “Eradicating a $600 Billion Industry.”
