Zacks Industry Outlook Highlights: CIGNA, WellPoint, Humana, UnitedHealth Group and Molina Healthcare
CHICAGO, Oct. 29, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Health Insurance, including CIGNA Corp. (NYSE:CI-Free Report), WellPoint Inc. (NYSE:WLP-Free Report), Humana Inc. (NYSE:HUM-Free Report), UnitedHealth Group Inc. (NYSE:UNH-Free Report) and Molina Healthcare, Inc. (NYSE:MOH-Free Report).
Industry: Health Insurance
Link: http://www.zacks.com/commentary/35050/health-insurance-obamacare-transforming-the-industry
The U.S. health insurance industry is undergoing rapid transformation. The change is mostly being brought about by the unending rise in medical costs, price-and service-consciousness among consumers, fierce competition, shift of customer mix, uncertain economic conditions in the U.S. and abroad, and the pressures created by the health care reform law.
The health and medical insurance industry is an integral part of the U.S. economy. According to the Centers for Medicare and Medicaid Services, health expenditures account for approximately 18% of the country's annual gross domestic product. The World Health Organization has stated that health care expenditure per person in the United States is the highest in the world.
Despite the large amount of money spent on health care, the quality of care has been inferior and millions of Americans lacked health insurance coverage or were underinsured. This was mostly due to a dysfunctional system that was in place for several years. To expand coverage, President Obama introduced drastic health care reforms in March 2010, aimed at bringing down the country's uninsured rate and reining in medical-cost inflation.
Health Care Overhaul
One of the biggest factors that has been changing the face of the health insurance industry is the Patient Protection and Affordable Care Act (PPACA) which was passed in 2010, marking the start of a multi-year implementation process. It is the most substantial overhaul in the history of the nation's health care system.
The reform was aimed at offering coverage to the 32 million uninsured Americans, affordable health care facilities, expanded coverage for customers with pre-existing health conditions and a check on health insurers.
Significant provisions of the legislation mandated coverage requirements; rebates to policyholders based on minimum benefit ratios; adjustments to Medicare Advantage premiums; establishment of state-based exchanges; greater investment in health IT; annual insurance industry premium-based assessment; reduction in federal assistance on Medicare Advantage; restriction on rescission of policies and elimination of annual as well as lifetime maximum limits. Most of the provisions of the act have come into effect over these years making health insurers jittery.
Despite these changes and the challenges thereof, the industry is thriving. Big players -- CIGNA Corp. (NYSE:CI-Free Report), WellPoint Inc. (NYSE:WLP-Free Report), Humana Inc. (NYSE:HUM-Free Report), UnitedHealth Group Inc. (NYSE:UNH-Free Report) and Molina Healthcare, Inc. (NYSE:MOH-Free Report) -- have reported unfaltering growth in premium, fees and other income since the health care reform was put into effect.
From the period 2010 to 2013, revenues of these insurers, which control a major market share of the private health insurance industry, increased 27% to approximately $284 billion while operating profit increased 10% to $11 billion.
Where's the Industry Headed?
Amid this transition, health insurance plans face both challenges and opportunities, many of which require a shift in business mix. The formation of online exchanges (which became operational last October) and Medicaid expansion are likely to swell the customer base. Then again, the players in the industry face heightened competition from these online exchanges as these have provided customers with comparable shopping options and easy access to information.
Moreover, the industry has opened up to international market which offers significant growth potential in untapped areas. Plus, the industry is expected enjoy diversification benefits as it is branching out into analytics and health services which are complementary to its core business of health insurance.
The industry is also witnessing the formation of alternative forms of care such as Accountable Care Organizations, patient-centered medical homes (PCMH), and an array of evidence-based and pay-for- performance concepts, because of rising medical costs. These arrangements drive providers such as hospitals and physicians to offer complete care at reasonable costs. Since these arrangements give utmost importance to performance and timeliness, patients receive quality care at affordable prices, and thereby reduce overall medical costs.
Finally, the industry is expected to witness increased use of information technology in the form of electronic records through which "big data" can be used to take informed decisions.
In a nutshell, the potential of the U.S. health insurance industry as a whole will be determined by how quickly and effectively it can address the challenges put forth by health care reform.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Get the full Report on CI - FREE
Get the full Report on WLP - FREE
Get the full Report on HUM - FREE
Get the full Report on UNH - FREE
Get the full Report on MOH - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
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.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
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.
Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
SOURCE Zacks Investment Research, Inc.
Share this article