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4 Top Performers From Health Insurance Industry in Q3

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Health insurers have been in focus since the election of President Donald Trump, who intended to repeal and replace the Affordable Care Act (ACA).  The issue, however, remained unresolved due to lack of votes and hence, regulatory uncertainty continues to linger.

The most recent effort by Senate Republicans to repeal the ACA, failed to meet success after Senate Majority Leader Mitch McConnell (R-KY) decided not to hold a vote on the Graham-Cassidy bill.

Health Insurers Continue to Impress

Despite facing stringent regulations, health insurers have shown impressive operating performance over the past several quarters, with most of the top players clocking solid top line, bottom line and membership growth. Their strong capital position also reflects profitable operations.

Further, health insurers are well positioned for long-term growth on the back of continuously increasing demand for government plans that primarily include Medicare and Medicaid plans. The aging U.S. population has boosted the overall demand for medical coverage. Hence, revenues of the companies dealing with these plans have seen consistent rise in government business.

The ACA has largely benefitted the industry through a reduction in uninsured population, consequently adding to medical enrollment and bad debt management.

Business diversifying strategies with primary focus on ancillary services and products have boosted insurers’ revenue base.

However, losses on public exchanges are a major headwind for the insurers.

Increasing operating costs related to regulations, investments in information technology, levy of fees and taxes also weigh on health insurers’ margins. The insurers, however are trying to manage this cost issue with the help of Accountable Care Organizations.

Stocks in Focus

Despite the challenges, health insurance stocks have had a bull run with the industry gaining nearly 5% for the third-quarter 2017, outperforming the S&P 500 average of 4%. The HMO industry is among the top 3% of the Zacks-ranked industries with key players like Triple-S Management Corporation , UnitedHealth Group Inc. (UNH - Free Report) , Centene Corporation (CNC - Free Report) and Select Medical Holdings, Corp. (SEM - Free Report) . While Triple-S Management sports a Zacks Rank #1 (Strong Buy), the other three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Triple-S Management, a leading health maintenance organization has rallied 40%, outperforming the industry. The company has also seen its Zacks Consensus Estimate for 2017 and 2018 being revised upward by 377% and 38.2%, respectively, in the past 90 days.

UnitedHealth Group, a leading diversified health and well-being company has outperformed the industry in the third quarter of 2017, evident from its gain of 5.6%, outperforming the industry. The company has also seen its Zacks Consensus Estimate for 2017 and 2018 being revised upward by 1% and 0.2%, respectively, in the past 90 days.

Centene, a multi-national healthcare company of the United States has gained 21% in the third-quarter of 2017, outperforming the industry. The company has also seen its Zacks Consensus Estimate for 2017 and 2018 being revised upward by 3.4% and 2.4%, respectively, in the past 90 days.

Select Medical, another leading managed care company has gained 25.1% in the third-quarter of 2017, outperforming the industry. The company has also seen its Zacks Consensus Estimate for 2017 and 2018 being revised upward by 7% and 10%, respectively, in the past 90 days.

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