What Happened?
A number of stocks fell in the morning session after bipartisan lawmakers introduced the Protecting Approved Care Act, legislation aimed at reforming prior authorization and payment rules in Medicare Advantage plans.
The bill, which received key backing from the American Association of Orthopaedic Surgeons, would require Medicare Advantage health plans to honor initial prior authorizations and strictly prohibit retroactive payment clawbacks. Prior authorization is an administrative process where insurers evaluate and approve specific medical treatments before care is delivered to manage utilization and control expenses.
Under current practices, insurers can sometimes review or reverse claims retroactively after procedures take place, recouping payments previously issued to providers. If enacted, this legislation would curtail insurers' ability to adjust or deny reimbursements post-treatment, potentially increasing medical loss ratios and raising administrative compliance burdens across managed care organizations. Consequently, market participants are weighing the long-term impact on operating margins for health insurers that maintain significant exposure to the Medicare Advantage program.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Healthcare Technology for Providers company Astrana Health (NASDAQ: ASTH) fell 2.7%. Is now the time to buy Astrana Health? Access our full analysis report here, it’s free.
- Health Insurance Providers company Clover Health (NASDAQ: CLOV) fell 4.8%. Is now the time to buy Clover Health? Access our full analysis report here, it’s free.
- Health Insurance Providers company Alignment Healthcare (NASDAQ: ALHC) fell 12.6%. Is now the time to buy Alignment Healthcare? Access our full analysis report here, it’s free.
- Therapeutics company Novavax (NASDAQ: NVAX) fell 3.6%. Is now the time to buy Novavax? Access our full analysis report here, it’s free.
Zooming In On Alignment Healthcare (ALHC)
Alignment Healthcare’s shares are very volatile and have had 23 moves greater than 5% over the last year. But moves this big are rare even for Alignment Healthcare and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock gained 18.7% on the news that the government announced a surprise increase in payment rates for Medicare Advantage plans. This change raises the revenue that insurance companies receive per patient from federal funds without increasing their costs. This is projected to improve profit margins for major providers like UnitedHealth and Humana.
Alignment Healthcare is down 49% since the beginning of the year, and at $10.32 per share, it is trading 58% below its 52-week high of $24.56 from July 2026. Investors who bought $1,000 worth of Alignment Healthcare’s shares 5 years ago would now be looking at only $599.30.
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