Shares of health insurance provider Elevance Health (NYSE:EVH) fell 3% in the afternoon session after the U.S. Commerce Department initiated a national security investigation into medical equipment and devices, raising concerns about potential tariffs.

The probe, conducted under Section 232 of the Trade Expansion Act, examines whether imports of items like syringes, infusion pumps, and surgical instruments pose a national security risk. Such investigations can pave the way for new import duties, creating a significant overhang for the sector. The goal of potential tariffs would be to boost domestic manufacturing by increasing the cost of foreign goods. This development has introduced new uncertainty for the industry, leading to broad-based declines in the stocks of major manufacturers, including Baxter International and GE HealthCare, as investors weigh the potential impact on supply chains and costs.

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Elevance Health’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 21 days ago when the stock dropped 3.5% on the news that the company's CFO flagged potentially elevated medical costs and weakening margins at an investor conference.

Speaking at a Wells Fargo conference, Chief Financial Officer Mark Kaye stated that Medicaid costs in the third quarter are trending slightly higher than anticipated. More significantly, the company “no longer expect[s] sequential operating margin improvement in the second half of the year.” Kaye also noted that medical costs under the Affordable Care Act are “meaningfully elevated versus historical levels.”

The commentary overshadowed the company’s reaffirmation of its 2025 adjusted earnings forecast of about $30 per share. The negative outlook on costs and margins appeared to spook the entire sector, as shares of other health insurers also declined on the news. Mizuho analysts described the overall commentary as “mixed” given the limited upside to margins in the near term.

Elevance Health is down 13.5% since the beginning of the year, and at $316.40 per share, it is trading 39.6% below its 52-week high of $523.95 from September 2024. Investors who bought $1,000 worth of Elevance Health’s shares 5 years ago would now be looking at an investment worth $1,240.

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