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Zacks Industry Outlook Highlights: UnitedHealth, Anthem, Aetna, Cigna and Humana
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For Immediate Release
Chicago, IL – May 21, 2018 – Today, Zacks Equity Research discusses Health Insurance, including UnitedHealth Group Inc. (UNH - Free Report) , Anthem Inc. , Aetna Inc. , Cigna Corp. (CI - Free Report) and Humana Inc. (HUM - Free Report) .
Health insurance is one of the few industries that have been able to hold up their outperformance for the past several years, irrespective of economic uncertainty and regulatory changes.
With the U.S. economy on firm footing now and regulations slowly abating, the industry is on another uptrend. Rising enrollment and top-line growth, increasing contributions from complementary businesses, product modifications, improved service, demographic changes, expansion of international operations, better claims handling, medical cost management, technological investment and upgrades, growth of new business units, mergers and acquisitions and healthy balance sheets have all contributed to health insurers.
Per a McKinsey & Co. report, the private payor market in North America is expected to grow from $583 billion in 2010 to $1,421 billion in 2025.
So What Are the Industry’s Growth Catalysts?
The industry has grown 33.6% in a year’s time, more than double the increase of 15.9% clocked by the S&P 500 index, during the same time frame. Interestingly, the industry has retuned more than double the S&P 500 index in each year since 2012. Let’s look at the factors that would fuel future growth.
Massive Opportunity in Medicaid, Medicare
Medicare and Medicaid, the health plans for retirees are highly coveted by health insurers. An aging American population, with its surging population of baby boomers reaching retirement age each day, acts as a catalyst to heavy demand for these policies.
While Medicaid and Medicare are primarily provided by and are under the purview of the government, pressure on public finances is prompting many governments to impose healthcare-spending cuts or seek out private payors as intermediaries to better manage spending and outcomes. Private health insurance players have indeed been quite successful in efficient management of these programs.
Per a study by Health Affairs in 2016, Medicare and Medicaid accounted for nearly 60% of health care revenues reported by the five largest U.S. commercial health insurance companies: UnitedHealth Group Inc., Anthem Inc., Aetna Inc., Cigna Corp. and Humana Inc.. Revenues from public coverage have more than doubled since the passage of the Affordable Care Act (ACA), growing from a combined total of $92.5 billion in 2010 to $213.1 billion in 2016. Between 2010 and 2016, Medicaid and Medicare enrollment in the five companies doubled, from 12.8 million to 25.5 million. Medicaid enrollment rose by 1 million in 2017 to nearly 55 million Americans, according to a new report from consulting firm PwC.
There seems to be no stopping this business expansion. Medicaid is the third-largest domestic program in the federal budget after Social Security and Medicare, and the share managed by private insurers is rising as states shift more of their Medicaid population to managed care plans. Per a report by PwC, the share managed by private insurers is rising as states shift more of their Medicaid population to managed care plans. This should fuel growth in this business.
Medicare is another excellent opportunity as the number of people eligible for Medicare is projected to surpass 70 million individuals by 2024, up from 60 million at present, with gross spending for Medicare expected to reach $1.2 trillion by 2024, up from $770 billion projected for 2018. Medicare Advantage continues to be a popular choice for approximately one-third of those enrolled in Medicare. Seniors have rewarded insurers with rapid growth in recent years and the same is expected to continue as the market continues to expand and evolve.
Cross Industry Collaboration to Cause Rapid Shift
Pharmacy-benefit managers teaming up with insurers is the latest in the mounting trend of health care consolidation. Healthcare companies are making concerted efforts to transform themselves into a comprehensive healthcare provider, offering a one-stop solution for their customers. To achieve this goal, pharmacy companies and health insurers are joining forces. The coming together of two different sections of the healthcare space testifies that business boundaries are getting blurred.
Moreover, insurers are under pressure to protect margins due to high medical cost, growing consumerism and high regulations. Joining other forward- or backward-integrated companies thus seems the best survival strategy that would provide companies with additional strength and a wider business spectrum.
Some of the mega deals in this vein that are currently underway are Aetna’s takeover by CVS Health for a staggering $69 billion and Cigna’s merger with Express Scripts, the largest pharmacy benefit management company, for a whopping $67 billion.
The completion of these deals will further leave the industry, which is already highly consolidated, with very few players.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: UnitedHealth, Anthem, Aetna, Cigna and Humana
For Immediate Release
Chicago, IL – May 21, 2018 – Today, Zacks Equity Research discusses Health Insurance, including UnitedHealth Group Inc. (UNH - Free Report) , Anthem Inc. , Aetna Inc. , Cigna Corp. (CI - Free Report) and Humana Inc. (HUM - Free Report) .
Industry: Health Insurance, Part 2
Link: https://www.zacks.com/commentary/162930/resurgent-economy-buyouts-to-keep-health-insurers-buoyant
Health insurance is one of the few industries that have been able to hold up their outperformance for the past several years, irrespective of economic uncertainty and regulatory changes.
With the U.S. economy on firm footing now and regulations slowly abating, the industry is on another uptrend. Rising enrollment and top-line growth, increasing contributions from complementary businesses, product modifications, improved service, demographic changes, expansion of international operations, better claims handling, medical cost management, technological investment and upgrades, growth of new business units, mergers and acquisitions and healthy balance sheets have all contributed to health insurers.
Per a McKinsey & Co. report, the private payor market in North America is expected to grow from $583 billion in 2010 to $1,421 billion in 2025.
So What Are the Industry’s Growth Catalysts?
The industry has grown 33.6% in a year’s time, more than double the increase of 15.9% clocked by the S&P 500 index, during the same time frame. Interestingly, the industry has retuned more than double the S&P 500 index in each year since 2012. Let’s look at the factors that would fuel future growth.
Massive Opportunity in Medicaid, Medicare
Medicare and Medicaid, the health plans for retirees are highly coveted by health insurers. An aging American population, with its surging population of baby boomers reaching retirement age each day, acts as a catalyst to heavy demand for these policies.
While Medicaid and Medicare are primarily provided by and are under the purview of the government, pressure on public finances is prompting many governments to impose healthcare-spending cuts or seek out private payors as intermediaries to better manage spending and outcomes. Private health insurance players have indeed been quite successful in efficient management of these programs.
Per a study by Health Affairs in 2016, Medicare and Medicaid accounted for nearly 60% of health care revenues reported by the five largest U.S. commercial health insurance companies: UnitedHealth Group Inc., Anthem Inc., Aetna Inc., Cigna Corp. and Humana Inc.. Revenues from public coverage have more than doubled since the passage of the Affordable Care Act (ACA), growing from a combined total of $92.5 billion in 2010 to $213.1 billion in 2016. Between 2010 and 2016, Medicaid and Medicare enrollment in the five companies doubled, from 12.8 million to 25.5 million. Medicaid enrollment rose by 1 million in 2017 to nearly 55 million Americans, according to a new report from consulting firm PwC.
There seems to be no stopping this business expansion. Medicaid is the third-largest domestic program in the federal budget after Social Security and Medicare, and the share managed by private insurers is rising as states shift more of their Medicaid population to managed care plans. Per a report by PwC, the share managed by private insurers is rising as states shift more of their Medicaid population to managed care plans. This should fuel growth in this business.
Medicare is another excellent opportunity as the number of people eligible for Medicare is projected to surpass 70 million individuals by 2024, up from 60 million at present, with gross spending for Medicare expected to reach $1.2 trillion by 2024, up from $770 billion projected for 2018. Medicare Advantage continues to be a popular choice for approximately one-third of those enrolled in Medicare. Seniors have rewarded insurers with rapid growth in recent years and the same is expected to continue as the market continues to expand and evolve.
Cross Industry Collaboration to Cause Rapid Shift
Pharmacy-benefit managers teaming up with insurers is the latest in the mounting trend of health care consolidation. Healthcare companies are making concerted efforts to transform themselves into a comprehensive healthcare provider, offering a one-stop solution for their customers. To achieve this goal, pharmacy companies and health insurers are joining forces. The coming together of two different sections of the healthcare space testifies that business boundaries are getting blurred.
Moreover, insurers are under pressure to protect margins due to high medical cost, growing consumerism and high regulations. Joining other forward- or backward-integrated companies thus seems the best survival strategy that would provide companies with additional strength and a wider business spectrum.
Some of the mega deals in this vein that are currently underway are Aetna’s takeover by CVS Health for a staggering $69 billion and Cigna’s merger with Express Scripts, the largest pharmacy benefit management company, for a whopping $67 billion.
The completion of these deals will further leave the industry, which is already highly consolidated, with very few players.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.