Hedge funds have turned cautious on the U.S. healthcare sector, selling more healthcare stocks than they bought last week for the first time in 14 weeks, according to a note from Goldman Sachs. The shift comes as Affordable Care Act (ACA) subsidies—which helped millions during the COVID-19 pandemic—are set to expire at the end of December 2025, creating uncertainty for insurers, providers, and patients alike.

Expiring Subsidies Put Pressure on Healthcare Stocks

Approximately 24 million Americans obtain health insurance through the ACA, also known as Obamacare. Subsidies provided during the pandemic have helped keep premiums manageable, but unless Congress acts, these financial supports will expire on December 31, 2025, leaving many Americans facing significantly higher healthcare costs.

President Donald Trump stated his intention to meet with health insurers in the coming weeks to discuss ways to lower healthcare prices, reflecting growing public concern over rising costs.

Hedge Funds Increase Short Positions

Goldman Sachs reported that hedge funds were net sellers of healthcare provider and services stocks, as well as pharmaceutical and biotechnology firms. The only sub-sectors showing net purchases were life sciences and healthcare technology.

Short positions—bets that stock prices will decline—outnumbered long positions by more than eight to one, signaling expectations of falling valuations amid the subsidy debate. Despite this cautious positioning, overall hedge fund healthcare holdings remain relatively high compared to past year and five-year averages, according to Goldman.

Political and Market Implications

Rising healthcare costs, alongside other consumer price pressures, have become a significant political issue ahead of the 2026 midterm elections. House Republicans recently passed legislation backed by Trump that aims to reduce premiums for some Americans while cutting subsidies for others, effective January 2027—just two months after voters head to the polls.

This political uncertainty is contributing to hedge fund caution in the sector, as investors weigh potential market disruptions and regulatory changes.

Top Short Picks Among U.S. Mid-Cap Stocks

According to Hazeltree, which tracks 700 asset managers and 15,000 stocks globally, telehealth firm Him & Hers (HIMS.N) and scientific instrument maker Bruker Corp (BRKR.O) were the most shorted mid-sized U.S. stocks in November 2025. Requests for comment from both companies were not immediately returned.

The surge in short bets indicates that hedge funds are increasingly wary of valuation risks in healthcare amid subsidy uncertainty and broader market pressures.

Conclusion: Healthcare Stocks Face Volatility

As the ACA subsidy deadline approaches, U.S. healthcare stocks are entering a period of volatility, with hedge funds positioning for potential declines. Investors should monitor congressional actions, healthcare policy developments, and insurer responses, as these factors will likely drive stock performance and investor sentiment in the coming months.