NEW YORK (AP) -- Shares of Health Net rose Monday after an analyst upgraded the stock, saying the health insurer's shares could double if provisions of the 2010 health care overhaul are successful.
THE SPARK: Susquehanna Financial Group analyst Chris Rigg raised his rating on the stock to "Positive" from "Neutral" and increased his price target to $40 per share from $35. He said Health Net could gain a great deal of revenue from expanded Medicaid coverage and commercial health care exchanges, both of which come from the Patient Protection and Affordable Care Act. It could also gain revenue from new plans for patients who are on both Medicare and Medicaid.
"If the Affordable Care Act coverage expansions work, Health Net shares could potentially double over the next 12 to 18 months," Rigg wrote. "It would not be surprising if Health Net's revenue increased by 50 percent over the next two to four years."
He said the company should experience some significant profit growth over the next few years based on cost cuts even if the expansions are not successful.
THE BIG PICTURE: Health Net Inc. is based in Woodland Hills, Calif., and it provides commercial health insurance and privately run versions of the government's Medicare program, which covers the elderly and disabled people. It also administers the state-federal Medicaid program for poor and disabled people and works with TriCare, which provides health insurance for active and retired military members and their families.
Health Net is one of the insurers that stands to benefit as states move patients who are on both Medicare and Medicaid to coordinated programs. Patients on Medicare and Medicaid, or "dual eligibles," generally have expensive medical conditions. Health Net and other companies are getting ready to start running trial plans for those patients.
Health Net will be one of the plans competing on California's new state health exchange. The exchanges will start enrolling customers in October. Coverage begins Jan. 1, the same time virtually everyone in the country will be required to have health insurance or pay a penalty.
The exchanges offer individuals and small businesses a choice of private insurance plans similar to those already offered to workers at bigger companies. The goal is to provide affordable plans with an annual cap on out-of-pocket expenses and guaranteed coverage despite someone's medical condition.
SHARE ACTION: Health Net shares rose $1.48, or 5 percent, to $31.06 in afternoon trading. The stock has advanced more than 22 percent in 2013.
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