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The Zacks Analyst Blog Highlights: UnitedHealth Group, Anthem and Humana

Zacks Equity Research
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For Immediate Release

Chicago, IL – November 9, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include UnitedHealth Group Inc. UNH, Anthem Inc. ANTM and Humana Inc. HUM.

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Here are highlights from Thursday’s Analyst Blog:

Midterm Elections Put These Health Insurers in Focus

The U.S. midterm election, which saw the Democrats gain control of the House of Representatives, bought much cheer to the health insurance sector, as the elections saw the passage of ballot initiatives to expand Medicaid under the Affordable Care Act (ACA).

The repeal of the ACA or more popularly called the Obamacare enacted in 2010 was largely aimed by the Trump administration.

However, government’s many attempts to repeal the ACA (over the past two years) met no success, and now that Democrats have the control of the House, the repeal of the ACA should not to be in sight in the near term. It also means that reduction in Medicaid and Medicare spending, should be off the table.

Retention of ACA means bigger business for insurers as this legislation has expanded health insurance for millions of Americans. This also means that the insurance industry will be more stable. 

Medicaid Expansion Should Get a Boost

With change in control in the House, major alterations to the ACA like Medicaid Expansion would be difficult. This indirectly means that Medicaid expansion will likely remain intact.

Medicaid expansion under the ACA resulted in nearly 15 million people gaining coverage. At the same time, over the last decade, states have increasingly turned to insurers to manage their Medicaid programs, with the help of private insurance companies. Players like Centene Corp. and Wellcare Health Plans that are primarily engaged in Medicaid business have seen their membership surge substantially since the Medicaid Expansion came into effect in 2014.

Medicaid was one of the most debated issue going into the midterm elections.

Kaiser Health News reported that following the election, 37 states including the District of Columbia have adopted the ACA’s Medicaid expansion. It stated that many studies on the effects of ACA Medicaid expansion point to positive effects on coverage, access to care, service utilization, and state budgets and economies.

The midterm election also saw voters in three conservative states, Nebraska, Idaho and Utah approve Medicaid expansion. Medicaid expansion in these states will cover around 300,000 low-income people, according to estimates.

Industry’s Performance

The ACA has been a net gainer for health insurers, having led to an increase in enrollment, increase in business efficiency by mandated investments in technology, shift to payment for value from payment for fee for service and many other positives in the industry. These positive have overridden the headwinds from regulations bought in by the ACA.

The Medical-HMO industry has therefore been one of the best-performing industries, having gained a whopping 235.33% compared with the Zacks S&P 500 Composite index’s growth of 59%.

Shares of Health Insurers & Hospitals Gain

Shares of hospital companies like HCA Healthcare, and Tenet Healthcare gained 4.7% and 8.12%, respectively, as Medicaid expansion will drive patient admission volumes for these companies.

Shares of the health insurers– UnitedHealth Group Inc., Anthem Inc., Humana Inc., Molina Healthcare Inc. rallied 4.2%, 6.6%, 6.7% 10.5%, respectively. All these companies have witnessed a substantial increase in Medicaid business for the past many years. The industry has also witnessed a slew of mergers and acquisitions, wherein players are buying other companies engaged in Medicaid and Medicare business, in order to gain market share. Given the recent changes in the House, we expect to see further consolidation in the health insurance sector.

Among the companies mentioned above, Humana, Anthem and UnitedHealth carry a Zacks Rank #2 (Buy) and Molina Healthcare carries a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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