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Trump Boosts Short-Term Health Plans: Top 4 Insurance Plays

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On Aug 1, the Trump administration released a finalized rule relating to short-term and limited-duration insurance coverage. US Health and Human Services Secretary Alex Azar announced a rule that provides cheaper and effective short-term health plans to individuals and businesses that find policies under Obamacare unaffordable.

The move is expected to assist small businesses as well as working families vulnerable to the rise in healthcare costs. This would also lead to higher demand for health insurance plans. Under such circumstances, investing in health insurance stocks seems prudent.

Trump’s Short-Term Health Plans Are Significantly Cheaper

The new rule allows customers to purchase limited-duration health plans for periods as short as 12 months. Moreover, the plans can be renewed post the termination of coverage after the said period and is renewable for further 24 months. Under Obamacare, however, the maximum period which was allowed as per the policy was three months.

Such an accommodation makes these health plans less pricey compared to Obamacare-compliant policies. This is because these plans can be customized to suit policyholders’ needs and do not cover the mandatory and costly essential health benefits under the current federal law passed by the Obama administration.

Despite receiving huge subsidies on premiums through Obamacare exchanges, a customer ends up paying overwhelmingly high deductibles and out-of-pocket maximums (OOP) on such policies. Notably, deductibles under the Silver Plan have increased upwards of 13% in just a year’s time. Working families that usually opt for such coverages would have to pay a lot lesser under the short-term plans of their choice.

Per an estimate by Centers for Medicare and Medicaid Services (CMS), approximately 600,000 Americans would opt out of Obamacare coverages by next year. Rising costs associated with such health plans would result in about 1.6 million people in America moving to short-term policies by 2022, the CMS estimated.

How Are Limited-Coverage Plans Beneficial?

The Trump administration’s push to make health plans more accessible also allows increases the freedom of choice. Moreover, with more people opting out of Obamacare to choose short-term policies, an increase in federal spending by $28.2 billion over a decade is likely.

Companies as well as individuals located in the same region or involved in similar businesses are allowed to form associations. Moreover, just like large employer group plans, AHPs would not be required to necessarily cover 10 types of essential benefits, including hospitalization, drugs and maternity care. Such requirements were compulsory under Obamacare.

The Association Health Plans (AHP) aims to provide the same healthcare benefits to employees of smaller companies that are enjoyed by workers of bigger businesses. Such a provision provides small firms the power to negotiate costs and flexibility of healthcare coverage. The plan will come into effect on Sep 1.

4 Best Choices

Trump’s latest push to provide an alternative to the ACA would provide millions of Americans the freedom to choose their own health policies. Small business owners, working families and retailers participating in group health plans would witness a reduction in administrative costs arising out of economies of scale.

Such developments would not only improve the ability to insure oneself but also boost the overall sales of insurance policies. In this context, we have selected four stocks that are expected to gain from these factors. These four stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare, Inc. (MOH - Free Report) arranges for the delivery of healthcare services and offers health information management solutions to individuals and families that receive care through Medicaid, Medicare and other government-funded programs.

The company is based out of Long Beach, CA and carries a Zacks Rank #1. The expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 64.3% over the last 60 days.

WellCare Health Plans, Inc. (WCG - Free Report) is the provider of managed care services for government-sponsored health care programs.

The company is based out of Tampa, FL and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 27.69%. The Zacks Consensus Estimate for the current year has improved 5.9% over the last 60 days.

Cigna Corporation (CI - Free Report) is a provider of insurance and related products and services in the United States as well as across the globe. The company also provides coverage to employers, unions and other groups and individual healthcare policies.

The Zacks Rank #2 company is based out of Bloomfield, CT. The expected earnings growth rate for the current year is 31.93%. The Zacks Consensus Estimate for the current year has improved 4.2% over the last 60 days.

Anthem, Inc. (ANTM - Free Report) is the owner and operator of a health benefits company in the United States. It provides commercial, business as well as group health insurance plans.

The company is based out of Indianapolis, IN and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 28.58%. The Zacks Consensus Estimate for the current year has improved 0.7% over the last 60 days.

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