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Average Family Health Insurance Premium Skyrockets During Affordable Care Act Era

It’s no secret – health insurance premiums have only gone one way over time. Over the last twelve years, family premiums for employer-sponsored coverage have jumped nearly 60% according to the Kaiser Family Foundation Employer Health Benefits Survey conducted last year. Roughly 155 million people in the U.S. rely on employer-sponsored coverage.

The rate of growth in premiums has outpaced wages over the same time frame. Employers and employees spent an average of $22,221 in 2021 for family health insurance according to the Kaiser report. Workers contributed an average of about $6,000 this year with employers covering the rest. Back in 2010, the average amount spent between employers and employees was approximately $13,900. The average family health insurance premium has risen nearly 60% since the ‘Affordable’ Care Act (ACA) was signed into law.

The outlook becomes much worse when we factor in non-employer health insurance premiums. Since the ACA was signed into law back in 2010, the average family health insurance premium in the U.S. has more than tripled. While most of the non-employer premiums are now subsidized by taxpayers, the rate of increase is quite alarming.

In our current investing environment, it’s widely known that health insurance premiums have skyrocketed. Now we must decipher which tools to utilize to best counteract these higher costs.

The biggest beneficiaries of rising premiums have undoubtedly been health insurers. These insurers’ stocks are the tools we can use to accomplish our investing goal of neutralizing increasing healthcare costs. As we can see below, the two stocks we will be analyzing today have vastly outperformed the S&P 500 since the ACA was signed into law:

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

These two companies are both components of the Zacks Medical – HMOs industry group, which currently ranks in the top 33% out of approximately 250 industries. Investing in stocks located within the top industry groups can provide a constant ‘tailwind’ to our investing success. Also note the favorable characteristics for this industry:

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

UnitedHealth Group, Inc. (UNH)

UnitedHealth Group operates as a diversified healthcare company in the United States. The company provides a wide range of healthcare products and services including health maintenance organizations (HMOs), preferred provider organizations (PPOs), as well as managed fee-for-service programs. Founded in 1977 and headquartered in Minnetonka, MN, UNH offers the full spectrum of health benefit programs for individuals, employers, military service members, retirees, as well as Medicare and Medicaid beneficiaries.

UNH boasts the largest and most diverse membership base within the managed-care market which gives the company a significant competitive advantage. The company has acquired a number of competing healthcare providers over the years and also built its prescription drug business through OptumRx via the acquisition of Catamaran in 2015.

UNH revenues have grown consistently as the firm witnessed a CAGR of 5.1% in the five-year period ending in 2020. Last year, revenues increased 12% to $287.6 billion. For 2022, UNH expects revenues in the range of $317-$320 billion, the midpoint of which indicates a 10.7% increase from last year. We expect the double-digit growth to continue in the years ahead.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

UNH has delivered an earnings beat in each quarter for the past five years running. The health insurer most recently reported Q1 EPS last week of $5.49, a +1.67% surprise over the $5.40 consensus estimate. UNH has posted a trailing four-quarter average earnings surprise of +3.73%, supporting the stock’s 39.6% ascent in the past year.

UnitedHealth Group Incorporated Price and EPS Surprise

UnitedHealth Group Incorporated Price and EPS Surprise
UnitedHealth Group Incorporated Price and EPS Surprise

UnitedHealth Group is a Zacks #2 (Buy) stock and has recently witnessed positive earnings estimate revisions. Analysts have increased their full-year EPS estimates by +0.1% in the past week. The Zacks Consensus Estimate for 2022 EPS is now $21.72, translating to growth of 14.2% compared to last year.

Anthem, Inc. (ANTM)

Anthem operates as a domestic health benefits company, offering an array of network-based managed care benefit plans to large and small groups, individuals, as well as Medicaid and Medicare markets. ANTM also offers pharmacy, dental, vision, life and disability insurance benefits. Founded in 1944 and headquartered in Indianapolis, IN, Anthem serves over 44 million medical members through its affiliated health plans.

Anthem has substantially improved its top-line in recent years, witnessing a CAGR of 9% from 2015-2020 on the heels of higher membership numbers and premium rate increases. Last year, revenues of $136.9 billion improved 13.4% year-over-year. Given ANTM’s strong Medicaid and Medicare businesses, we expect the revenue growth trend to continue into 2022.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

ANTM has exceeded earnings estimates in each of the past four quarters, delivering an average earnings surprise of +5.15% over that timeframe. ANTM most recently reported Q4 EPS back in January of $5.14, a +0.59% surprise over the consensus estimate. ANTM shares have outperformed the market over the past year with a 37.3% return.

Anthem, Inc. Price and EPS Surprise

Anthem, Inc. Price and EPS Surprise
Anthem, Inc. Price and EPS Surprise

ANTM is scheduled to report Q1 earnings tomorrow, April 20th. The Zacks Consensus EPS Estimate stands at $7.81, which would represent an 11.41% increase relative to the same quarter in the prior year.


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