President Barack Obama has said that eight million people have
opted for Obamacare during its very first year. This statement
was made just a few days before enrollment for the year for the
Patient Protection and Affordable Care Act (ACA) comes to a
Enrollment Exceeds Estimates
At this point, there is no denying the fact that the ACA as a
whole is an unqualified success. The enrollment figure of
eight million exceeds the original Congressional Budget Office
(CBO) estimate by one million. The CBO estimate was made before
the exchange was hampered by computer errors. In fact, the CBO
had reduced the estimate to 6 million signups in
Speaking at a news conference, President Obama said: "We've
got a sizeable part of the U.S. population now that are -- for
the first time, in many cases -- in the position to enjoy the
financial security of health insurance."
Balancing Out Costs
The President said 35% of those who have signed up are below
the ages of 35. This implies that enrollments for young adults
and children are 4% higher than on March 1st. This figure is
particularly significant because it improves the odds for
insurers. Insurance companies want more young and (therefore)
healthy people to sign up. This would cover the costs and risk
involved with providing coverage to the old and the sick.
At the same time, it is important to note that this figure
includes those children below the age of eighteen who are still
covered by their parents' plans. What is crucial are the numbers
for the young adult age bracket which will really make
a difference, since they will pay for their own plans.
Effect on Premiums
The increase in the number of young individuals signing up
could help to keep costs down, especially if most are healthy.
This was the view expressed by an important member of the
nonprofit Kaiser Family Foundation, based out of Menlo Park,
However, insurance commissioner for North Dakota, Adam Hamm,
has said that an increase in the enrollment of younger
individuals does not guarantee a reduction in rates across the
board. What could be crucial is not just the age but also the
health of those signing up.
Insurers' Prospects Brighten
Despite certain misgivings, the increase in the number of
enrollments is good news for insurers. Allowing for the finer
details of the numbers, the rise in the number of younger people
is particularly significant. Below we present two insurance
stocks which possess the potential to grow appreciably in the new
environment, each of which also has a good Zacks Rank:
) is our first pick. In its latest guidance on 2014, published on
March 21, 2014, the company stated that it expects full-year 2014
net income to exceed $8.20 per share, higher than the previous
guidance of over $8.00 per share. The outlook was raised on
the back of projected growth of 1-1.3 million or 3-4% in new
medical members, 4% in operating revenue and 5% operating
WellPoint has been undertaking a number of marketing and
enrolment initiatives that are expected to boost memberships in
2014. Moreover, the company's core business enhancement
initiatives are also quite impressive and position the company to
capitalize on core growth opportunities.
WellPoint holds a Zacks Rank #2 (Buy) and has expected
earnings growth of 8.3% for the next financial year. The forward
price-to-earnings ratio (P/E) for the current financial year (F1)
Next up we have
). The medical insurance major should benefit from growth in the
Medicaid and Medicare segments, its fast-growing health services
segment and an expanding provider network.
Meanwhile, Aetna is witnessing earnings accretion from the
acquisition of Coventry. The Coventry takeover has enabled the
company to position itself in the fast-growing government
businesses. The company expects revenues of $200 million in 2014
which is expected to increase to $400 million in 2015.
Currently the company holds a Zacks Rank #2 (Buy) and has
expected earnings growth of 11.20% for the next financial year.
It has a P/E (F1) of 10.58.
The success of Obamacare means that the scenario is now
increasingly in favor of insurers. Given their past performance
and the proven ability to deal with legislative changes, these
choices would make good additions to your portfolio.
AETNA INC-NEW (AET): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis
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