We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 HMO Stocks in Focus Amid an Aging U.S. Population, Tech Innovation
Read MoreHide Full Article
The U.S. health insurance industry, commonly referred to as the Health Maintenance Organization (HMO), benefits from a set of diversified, cost-effective plans that generate steady premium income and secure contract renewals. However, regulatory changes could tighten Medicaid eligibility and reduce ACA enrollment, affecting membership and reimbursements. Demand for Medicare products should remain strong as the U.S. population ages, supporting enrollment and premium growth. Investments in telehealth, AI, cloud computing and data analytics are improving efficiency, patient engagement and long-term revenue prospects despite increasing near-term costs. HMOs are also pursuing strategic mergers and acquisitions (M&A) to expand market presence and diversify operations. Industry leaders such as UnitedHealth Group Incorporated (UNH - Free Report) , The Cigna Group (CI - Free Report) , Humana Inc. (HUM - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) are well-positioned to capitalize on these favorable growth dynamics.
About the Industry
The Zacks HMO industry consists of entities (either private or public) that take care of subscribers’ basic and supplemental health services. Players in this space primarily assume risks and assign health and medical insurance policy premiums. Industry participants also provide administrative and managed-care services for self-funded insurance. Services are generally offered via a network of approved care providers (called in-network), which include primary care physicians, clinical facilities, hospitals and specialists. However, out-of-network exceptions are made during emergencies or when medically necessary. Health insurance plans can be availed through private purchases, social insurance or social welfare programs.
4 Trends Shaping the Future of the HMO Industry
Diversified Offerings Support Enrolment Stability: Health insurers continue to strengthen their membership base by offering diversified, cost-effective plans with enhanced benefits. These offerings support steady enrollment growth, generate consistent premium income and often lead to contract wins and renewals from federal and state agencies. However, gains from diversified products are expected to only partly offset the expected Medicaid membership declines resulting from growing regulatory challenges following the enactment of the One Big Beautiful Bill Act. The legislation introduced stricter Medicaid eligibility checks, work requirements and reduced federal funding. These measures, coupled with the absence of ACA subsidy extensions, are likely to reduce enrollment and pressure margins, prompting insurers to focus more on higher-margin commercial plans, while anticipated Medicare Advantage reimbursement rate increases in 2026 may provide some support.
An Aging U.S. Population: Medicare plans are specifically designed to meet the healthcare needs of individuals aged 65 and older, and an aging U.S. population is expected to drive sustained demand for these products. As the baby boomer generation enters retirement and life expectancy continues to increase, health insurers are well-positioned to benefit and generate higher premium revenues. To effectively serve this demographic, insurers maintain broad networks of healthcare providers, including physicians, hospitals, pharmacies and ancillary care organizations, while some also operate dedicated senior-focused care centers that deliver personalized, high-quality services tailored to the unique medical and wellness needs of older adults.
Digital Transformation and Technological Innovation: The HMO industry continues to strengthen its investment in virtual healthcare solutions, or telehealth services, as digital transformation reshapes the healthcare landscape. Technologies such as Artificial Intelligence (AI)-powered chatbots, voice assistants, mobile health applications, robotics, cloud computing and advanced data analytics are revolutionizing the way healthcare services are delivered, allowing patients to receive timely care from the comfort of their homes. This shift not only eases the strain on the U.S. healthcare system by reducing hospital visits and admissions but also enhances patient experience and care accessibility. While the adoption of advanced technologies may initially increase costs for health insurers, the resulting gains are expected to support stronger and more sustainable revenue growth over the long term.
Strategic Expansion Via Mergers and Acquisitions: In addition to embracing technological advancements, HMOs frequently engage in M&A to expand their capabilities, penetrate new markets, strengthen their foothold in existing regions, grow their membership base and enhance their nationwide reach. These strategic transactions also promote business diversification, enabling companies to maintain a competitive edge within the industry. Following the Federal Reserve's three interest rate cuts in 2025, borrowing conditions have become more favorable. Lower financing costs are expected to encourage greater M&A activity.
Zacks Industry Rank Instills Optimism
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. The Zacks Medical-HMOs industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #27, which places it in the top 11% of 246 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few stocks that you may want to buy or retain in your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms S&P 500, Outperforms Sector
The Zacks Medical-HMO industry has gained 17.3% in the past year compared with the Zacks S&P 500 composite’s 31.3% growth. The Zacks Medical sector rallied 2.8% in the same time frame.
One-Year Price Performance
Image Source: Zacks Investment Research
Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry trades at 16.66X compared with the S&P 500’s 22.17X and the sector’s 19.33X.
Over the past five years, the industry has traded as high as 19.57X and as low as 11.58X, with the median being at 16.14X, as the chart below shows.
Forward 12-Month Price/Earnings (P/E) Ratio
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
5 Stocks to Keep a Close Eye On
We present five stocks from the space, either carrying a Zacks Rank #2 (Buy) or #3 (Hold). Considering the current industry scenario, it might be prudent for investors to buy or retain these stocks in their portfolio, as these are well-placed to generate growth in the long haul.
Centene: Based in Missouri, Centene continues to benefit from strong momentum in its Medicare and Medicaid businesses, supported by numerous contract awards and steady membership expansion. The growing aging population in the United States remains a key driver of demand for Medicare Advantage plans, reinforcing the strength of Centene’s Medicare segment. This Zacks Rank #1 company also pursues strategic growth through acquisitions and provider partnerships. Management projects premium and service revenues within $171-$175 billion for 2026.
The Zacks Consensus Estimate for Centene’s 2026 earnings is pegged at $3.47 per share, which indicates a 66.8% rise from the year-ago figure. CNC’s earnings outpaced estimates in three of the last four quarters and missed the mark once, the average being 74.90%.
Price & Consensus: CNC
Image Source: Zacks Investment Research
Molina Healthcare: This California-based health insurer develops affordable Medicare and Medicaid plans, enriched with extensive benefits, which have consistently led to contract wins. These contracts have contributed to a steadily growing customer base for the Zacks Rank #2 company. Management expects the 2026 premium revenue outlook to be approximately $42 billion. The company continues to strengthen its market position through acquisitions, including ConnectiCare in 2025.
The Zacks Consensus Estimate for Molina Healthcare’s 2026 earnings is pegged at $5.23 per share. The consensus mark for MOH’s 2026 earnings has moved 0.4% north over the past 30 days. MOH’s earnings beat estimates in one of the last four quarters and missed the mark thrice.
Price & Consensus: MOH
Image Source: Zacks Investment Research
UnitedHealth Group: Minnesota-based UnitedHealth Group continues to deliver solid revenue growth, driven by the strong performance of its UnitedHealthcare and Optum segments. UnitedHealthcare benefits from enhanced Medicare and Medicaid offerings that combine affordability with attractive benefits. Optum remains a key growth engine, leveraging strategic acquisitions, advanced technology and data-driven healthcare solutions to enhance care delivery and operational efficiency. Additionally, continued focus on mergers and acquisitions, coupled with expanding telehealth capabilities, strengthens the nationwide footprint of this Zacks Rank #3 company.
The Zacks Consensus Estimate for UnitedHealth Group’s 2026 earnings is pegged at $18.29 per share, which implies 11.9% growth from the year-ago figure. UNH’s earnings beat estimates in three of the last four quarters and missed the mark once, the average surprise being 0.84%.
Price & Consensus: UNH
Image Source: Zacks Investment Research
Cigna: Based in Connecticut, the company continues to demonstrate strong growth, supported by the robust performance of its two key business segments—Evernorth and Cigna Healthcare. Evernorth benefits from its comprehensive portfolio of specialty pharmacy services, while Cigna Healthcare leverages its broad customer base across both the U.S. Government and U.S. Commercial markets. This Zacks Rank #3 company further enhances its market position and growth prospects through strategic acquisitions and partnerships with leading healthcare organizations, while continuously expanding its product offerings.
The Zacks Consensus Estimate for Cigna’s 2026 earnings is pegged at $30.38 per share, indicating 1.8% growth from the prior-year figure. CI’s earnings beat estimates in each of the last four quarters, the average surprise being 1.86%.
Price & Consensus: CI
Image Source: Zacks Investment Research
Humana: Headquartered in Kentucky, Humana has delivered steady growth, driven by increasing premium income and a strong membership base across its Medicare and Medicaid segments. The strong execution of these programs has enabled this Zacks Rank #3 company to win new contracts and successfully renew existing agreements with federal and state government agencies. Through its CenterWell platform, Humana continues to focus on meeting the evolving healthcare needs of the nation’s growing senior population. Additionally, strategic acquisitions such as Family Physicians Group, iCare and Inclusa have strengthened the company’s business diversification efforts and expanded its geographic reach.
The Zacks Consensus Estimate for Humana’s 2026 earnings is pegged at $9.01 per share. The consensus mark for 2025 revenues implies 25.3% growth from the year-ago actual. HUM’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 3.80%.
Price & Consensus: HUM
Image Source: Zacks Investment Research
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Shutterstock
5 HMO Stocks in Focus Amid an Aging U.S. Population, Tech Innovation
The U.S. health insurance industry, commonly referred to as the Health Maintenance Organization (HMO), benefits from a set of diversified, cost-effective plans that generate steady premium income and secure contract renewals. However, regulatory changes could tighten Medicaid eligibility and reduce ACA enrollment, affecting membership and reimbursements. Demand for Medicare products should remain strong as the U.S. population ages, supporting enrollment and premium growth. Investments in telehealth, AI, cloud computing and data analytics are improving efficiency, patient engagement and long-term revenue prospects despite increasing near-term costs. HMOs are also pursuing strategic mergers and acquisitions (M&A) to expand market presence and diversify operations. Industry leaders such as UnitedHealth Group Incorporated (UNH - Free Report) , The Cigna Group (CI - Free Report) , Humana Inc. (HUM - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) are well-positioned to capitalize on these favorable growth dynamics.
About the Industry
The Zacks HMO industry consists of entities (either private or public) that take care of subscribers’ basic and supplemental health services. Players in this space primarily assume risks and assign health and medical insurance policy premiums. Industry participants also provide administrative and managed-care services for self-funded insurance. Services are generally offered via a network of approved care providers (called in-network), which include primary care physicians, clinical facilities, hospitals and specialists. However, out-of-network exceptions are made during emergencies or when medically necessary. Health insurance plans can be availed through private purchases, social insurance or social welfare programs.
4 Trends Shaping the Future of the HMO Industry
Diversified Offerings Support Enrolment Stability: Health insurers continue to strengthen their membership base by offering diversified, cost-effective plans with enhanced benefits. These offerings support steady enrollment growth, generate consistent premium income and often lead to contract wins and renewals from federal and state agencies. However, gains from diversified products are expected to only partly offset the expected Medicaid membership declines resulting from growing regulatory challenges following the enactment of the One Big Beautiful Bill Act. The legislation introduced stricter Medicaid eligibility checks, work requirements and reduced federal funding. These measures, coupled with the absence of ACA subsidy extensions, are likely to reduce enrollment and pressure margins, prompting insurers to focus more on higher-margin commercial plans, while anticipated Medicare Advantage reimbursement rate increases in 2026 may provide some support.
An Aging U.S. Population: Medicare plans are specifically designed to meet the healthcare needs of individuals aged 65 and older, and an aging U.S. population is expected to drive sustained demand for these products. As the baby boomer generation enters retirement and life expectancy continues to increase, health insurers are well-positioned to benefit and generate higher premium revenues. To effectively serve this demographic, insurers maintain broad networks of healthcare providers, including physicians, hospitals, pharmacies and ancillary care organizations, while some also operate dedicated senior-focused care centers that deliver personalized, high-quality services tailored to the unique medical and wellness needs of older adults.
Digital Transformation and Technological Innovation: The HMO industry continues to strengthen its investment in virtual healthcare solutions, or telehealth services, as digital transformation reshapes the healthcare landscape. Technologies such as Artificial Intelligence (AI)-powered chatbots, voice assistants, mobile health applications, robotics, cloud computing and advanced data analytics are revolutionizing the way healthcare services are delivered, allowing patients to receive timely care from the comfort of their homes. This shift not only eases the strain on the U.S. healthcare system by reducing hospital visits and admissions but also enhances patient experience and care accessibility. While the adoption of advanced technologies may initially increase costs for health insurers, the resulting gains are expected to support stronger and more sustainable revenue growth over the long term.
Strategic Expansion Via Mergers and Acquisitions: In addition to embracing technological advancements, HMOs frequently engage in M&A to expand their capabilities, penetrate new markets, strengthen their foothold in existing regions, grow their membership base and enhance their nationwide reach. These strategic transactions also promote business diversification, enabling companies to maintain a competitive edge within the industry. Following the Federal Reserve's three interest rate cuts in 2025, borrowing conditions have become more favorable. Lower financing costs are expected to encourage greater M&A activity.
Zacks Industry Rank Instills Optimism
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. The Zacks Medical-HMOs industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #27, which places it in the top 11% of 246 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few stocks that you may want to buy or retain in your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms S&P 500, Outperforms Sector
The Zacks Medical-HMO industry has gained 17.3% in the past year compared with the Zacks S&P 500 composite’s 31.3% growth. The Zacks Medical sector rallied 2.8% in the same time frame.
One-Year Price Performance
Image Source: Zacks Investment Research
Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry trades at 16.66X compared with the S&P 500’s 22.17X and the sector’s 19.33X.
Over the past five years, the industry has traded as high as 19.57X and as low as 11.58X, with the median being at 16.14X, as the chart below shows.
Forward 12-Month Price/Earnings (P/E) Ratio
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
5 Stocks to Keep a Close Eye On
We present five stocks from the space, either carrying a Zacks Rank #2 (Buy) or #3 (Hold). Considering the current industry scenario, it might be prudent for investors to buy or retain these stocks in their portfolio, as these are well-placed to generate growth in the long haul.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Centene: Based in Missouri, Centene continues to benefit from strong momentum in its Medicare and Medicaid businesses, supported by numerous contract awards and steady membership expansion. The growing aging population in the United States remains a key driver of demand for Medicare Advantage plans, reinforcing the strength of Centene’s Medicare segment. This Zacks Rank #1 company also pursues strategic growth through acquisitions and provider partnerships. Management projects premium and service revenues within $171-$175 billion for 2026.
The Zacks Consensus Estimate for Centene’s 2026 earnings is pegged at $3.47 per share, which indicates a 66.8% rise from the year-ago figure. CNC’s earnings outpaced estimates in three of the last four quarters and missed the mark once, the average being 74.90%.
Price & Consensus: CNC
Image Source: Zacks Investment Research
Molina Healthcare: This California-based health insurer develops affordable Medicare and Medicaid plans, enriched with extensive benefits, which have consistently led to contract wins. These contracts have contributed to a steadily growing customer base for the Zacks Rank #2 company. Management expects the 2026 premium revenue outlook to be approximately $42 billion. The company continues to strengthen its market position through acquisitions, including ConnectiCare in 2025.
The Zacks Consensus Estimate for Molina Healthcare’s 2026 earnings is pegged at $5.23 per share. The consensus mark for MOH’s 2026 earnings has moved 0.4% north over the past 30 days. MOH’s earnings beat estimates in one of the last four quarters and missed the mark thrice.
Price & Consensus: MOH
Image Source: Zacks Investment Research
UnitedHealth Group: Minnesota-based UnitedHealth Group continues to deliver solid revenue growth, driven by the strong performance of its UnitedHealthcare and Optum segments. UnitedHealthcare benefits from enhanced Medicare and Medicaid offerings that combine affordability with attractive benefits. Optum remains a key growth engine, leveraging strategic acquisitions, advanced technology and data-driven healthcare solutions to enhance care delivery and operational efficiency. Additionally, continued focus on mergers and acquisitions, coupled with expanding telehealth capabilities, strengthens the nationwide footprint of this Zacks Rank #3 company.
The Zacks Consensus Estimate for UnitedHealth Group’s 2026 earnings is pegged at $18.29 per share, which implies 11.9% growth from the year-ago figure. UNH’s earnings beat estimates in three of the last four quarters and missed the mark once, the average surprise being 0.84%.
Price & Consensus: UNH
Image Source: Zacks Investment Research
Cigna: Based in Connecticut, the company continues to demonstrate strong growth, supported by the robust performance of its two key business segments—Evernorth and Cigna Healthcare. Evernorth benefits from its comprehensive portfolio of specialty pharmacy services, while Cigna Healthcare leverages its broad customer base across both the U.S. Government and U.S. Commercial markets. This Zacks Rank #3 company further enhances its market position and growth prospects through strategic acquisitions and partnerships with leading healthcare organizations, while continuously expanding its product offerings.
The Zacks Consensus Estimate for Cigna’s 2026 earnings is pegged at $30.38 per share, indicating 1.8% growth from the prior-year figure. CI’s earnings beat estimates in each of the last four quarters, the average surprise being 1.86%.
Price & Consensus: CI
Image Source: Zacks Investment Research
Humana: Headquartered in Kentucky, Humana has delivered steady growth, driven by increasing premium income and a strong membership base across its Medicare and Medicaid segments. The strong execution of these programs has enabled this Zacks Rank #3 company to win new contracts and successfully renew existing agreements with federal and state government agencies. Through its CenterWell platform, Humana continues to focus on meeting the evolving healthcare needs of the nation’s growing senior population. Additionally, strategic acquisitions such as Family Physicians Group, iCare and Inclusa have strengthened the company’s business diversification efforts and expanded its geographic reach.
The Zacks Consensus Estimate for Humana’s 2026 earnings is pegged at $9.01 per share. The consensus mark for 2025 revenues implies 25.3% growth from the year-ago actual. HUM’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 3.80%.
Price & Consensus: HUM
Image Source: Zacks Investment Research