Higher Co-payments this year will cause consumers to stop running to the Doctor everytime they get a runny nose so GET ON BOARD!
HMOs negotiate with Hospitals to determine how much to raise their premiums, but the wildcard is the healthcare consumer who runs to the emergency room for cuts, scrapes, insect bites, etc.. Higher Co-payments that are being Imposed on these healthcare Abusers by American corporations will lead to better earnings for the HMOs. Just a few weeks ago GE workers were on strike because of higher Co-payments as I recall........Hehehehehee!
Folks, HMOs are insurance companies! They take in premiums and pay out claims. Their cash is to cover those future claims. If they don't estimate their claims correctly they lose money -- lots of money if they miss by enough. What do you think happens to their stock price when they start losing money? HUM went to the 4s last time this happened. Granted an over-reaction and a great buying opportunity (David Jones indicated as much when he bought a million shrs in the 7-9 range at the time).
The fourth qtr showed higher medical cost ratios for most HMOs -- including HUM. This frightened the market. Higher medical costs can turn profits into losses in a hurry especially for the low margin players like HUM.
Now having said the above, it looks like the market was mistaken and the insurance cycle hasn't turned. Everybody, SIE, AET UNH, OHP etc., has been very positive about earnings this year. So it looks like the HMO group is oversold and is now recovering. Rapidly I might add -- so don't hesitate. JMO