It’s no secret – health insurance premiums have only gone one way over time. Over the last decade, family premiums for employer-sponsored coverage have jumped 47% according to the 2021 Kaiser Family Foundation Employer Health Benefits Survey. Roughly 155 million people in the U.S. rely on employer-sponsored coverage.
The rate of growth in premiums has outpaced both inflation (19%) as well as wages (31%) over the same time frame. Receiving family health insurance from work now costs employers and employees an average of $22,221 a year according to the Kaiser report. Workers contributed an average of about $6,000 this year with employers covering the rest.
The outlook becomes much worse when we factor in non-employer health insurance premiums. Since the Affordable Care Act (keyword “affordable”) 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.
As an investor, sometimes it pays to think of yourself as a handyman or contractor. You have a set of tools to accomplish different jobs, and you must adapt to the needs of each specific project. In our current investing environment, health insurance premiums have skyrocketed – and 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.
The iShares U.S. Healthcare Providers ETF (
IHF Quick Quote IHF - Free Report) seeks to track the investment results of an index composed of domestic equities in the healthcare providers sector. IHF has climbed nearly 25% this year and is currently hitting all-time highs. New highs are a sign of strength and investors would be wise to take note of three companies within this ETF that are also making new highs. These firms are three of the top ten holdings within IHF and account for roughly 35% of the total IHF holdings. Image Source: Zacks Investment Research
The iShares U.S. Healthcare Providers ETF offers investors exposure to companies that provide health insurance, diagnostics, and specialized treatment. Below we will delve into three top health insurers that are outperforming the market.
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. The company has boosted revenues 15% year-over-year through the first nine months of 2021 to $35.8 billion. Given ANTM’s strong Medicaid and Medicare businesses, we expect the revenue growth trend to continue into 2022.
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Anthem’s strong cash position has driven consistent dividend payouts and stock repurchases. In Q3 of this year, ANTM repurchased shares worth $480 million. In total, the company expects to repurchase shares worth $1.6 billion in 2021, which should further support its stock price.
ANTM accounts for over 9% of the total IHF ETF holdings mentioned earlier. The company has delivered an average earnings surprise of +4.71% over the previous four quarters. ANTM most recently reported EPS in October of $6.79, a 6.93% positive surprise over consensus. The firms’ shares have outperformed the market this year with a 46% return.
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UNH accounts for nearly 23% of the aforementioned IHF ETF holdings and has delivered an earnings beat in each quarter for the past eight years running. The company has posted a trailing four-quarter average surprise of +8.66%, supporting the stock’s 45.1% ascent this year.