Two of the best performing shares on the S&P/ASX 200 index on Monday have been the Medibank Private Ltd (ASX: MPL) share price and the NIB Holdings Limited (ASX: NHF) share price.
In early trade the shares of the private health insurers have risen a massive 11% and 9.5%, respectively.
Why are Medibank and NIB charging higher today?
Investors have been fighting to get hold of their shares following the Coalition's surprise Federal election victory this weekend.
Both companies had been out of favour with investors over the last 12 months due to concerns over Labor's plan to limit premium increases if it won the election.
Labor had proposed a limit of 2% on premium increases, which was expected to put pressure on margins and limit profit growth.
So, with Labor falling short and the Coalition government never officially countering the policy, investors appear to believe it will be business as usual for Medibank, NIB, and other private health insurers. In 2019 the average industry increase was 3.25%.
Is this the end of the matter?
According to a note out of Goldman Sachs, its analysts believed that Labor's plan had the potential to more meaningfully address industry affordability headwinds than other recent reform measures.
It also "indirectly increased the urgency for more major/sustainable industry reform to be delivered."
As the broker doubts that recent reforms are going to meaningfully counter affordability headwinds, it believes "the Coalition government and its Health Minister will need to consider these factors in both its preparation for the 2020 premium round, and also its medium-term reform agenda."
In light of this and the fact that companies were well-prepared for Labor's plan, it feels "the Health Minister should be in a position to deliver another consecutive premium rate reduction for the industry in 2020."
All in all, whilst this is undoubtedly a positive for the industry, it might be a little too soon for shareholders to get too excited.
