US health insurers, already feeling unwell at the prospect of a Barack Obama presidency, had their condition further downgraded this past week as the financial crisis hit earnings. While the patient has suffered a bit of a shock, the prognosis is better than the average 61 per cent drop over the past year in the shares of six leading managed-care companies would suggest.

The average prospective earnings multiple of Aetna, Humana, Cigna, UnitedHealth, WellPoint and Coventry Health Care of 5.4 times is pricing in an iron-fisted approach to healthcare reform under a Democratic White House and possibly a filibuster-proof majority in the Senate. But the reality may be closer to a velvet glove – or perhaps a latex one.

Take both Mr Obama and John McCain’s proposals to push for more widespread generic drug usage, or Mr Obama’s more substantial plan that would allow Medicare to negotiate drug prices with pharmaceuticals companies. These are bad for drug manufacturers, but on balance good for insurers, who are sensitive to such costs. Or how about Mr Obama’s plan to fine employers not offering health insurance and another that would force people to insure their children? These could add more than 30m new customers.

Of course, some of Mr Obama’s proposals are clearly negative for insurers’ earnings, while some of Mr McCain’s would be a boon. Mr Obama might force insurers to cover those with pre-existing ailments, while Mr McCain would let people shop for coverage in any state, undercutting expensive local mandates. In the event of a McCain victory, the sector would rally, and it has amply priced in a likely Democratic administration.

As in past campaigns, lobbying will likely water down sweeping proposals. Some is already happening, as Democrats reportedly received twice the donations from the industry as Republicans, reversing the trend in recent presidential contests. Consider it a dose of preventive medicine.

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