A dramatic sell-off in U.S. healthcare equities — led by steep declines in major insurers and managed-care names — has rewritten investor assumptions about the sector’s resilience. Triggered by lower-than-expected Medicare reimbursement proposals and downward earnings revisions, this wave of selling wiped out tens of billions in market value and forced fresh evaluations of defensive stocks once thought immune to volatility. Markets now face a new paradigm for healthcare valuations under tighter policy headwinds and rising cost pressures.

For years, the U.S. healthcare sector has been seen as a defensive anchor for many portfolios. It has been defined by stable demand, demographic trends, high levels of regulation (which, ironically, often protect established players) and relatively predictable cash flow. But regulation is also the biggest systemic risk of the industry, as it can change the economics of entire business models in a matter of weeks. And that is exactly what is happening…