With the sixteen day partial government shutdown coming to an
end, critics of Obamacare have shifted their focus from aspects
of the laws which they find objectionable. Now, the various
problems occuring its implementation have become the focal point
of their discussions.
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Even as the government shutdown began, Obamacare had already come
into effect. Online insurance exchanges are at the heart of the
new regime and have been operative since October 1. But they have
been plagued by serious problems and remain unusually difficult
Healthcare.gov, the portal for insurance registration in 36
states, has been affected by a series of technical problems.
These include delays in loading pages, error messages and
undecipherable text. The Obama administration has said that this
is primarily due to the large number of visitors during the first
10 days, a figure which it says is in excess of 14.6 million.
Health and Human Services Secretary Kathleen Sebelius has
acknowledged that the rollout has faced serious problems.
However, speaking to an audience at Cincinnati she said "constant
improvements are underway, so that we are getting people in much
The Insurance Sector Impact
The reason why investors and insurers alike continue to be wary
of the Obamacare launch is not just the fees and restrictions it
requires of insurers. The Act reduces funding for Medicare
Advantage, which benefits the elderly and disabled. This could
result in lower profit margins for investors.
One among the larger insurers,
UnitedHealth Group Inc.
) reported its earnings this week, which were near enough
estimates to be satisfactory. Third quarter earnings for 2013
came in at $1.53 per share, missing the Zacks Consensus Estimate
by a penny. Earnings continued to grow at 2.0% year over year.
This was primarily due to increased enrollment and higher
Among other major players,
) are slated to report earnings later in October while
) will release these numbers in November. The response to the new
situation from most of the major players in the sector has been
to refrain from participating in state-run exchanges. For
instance, in Connecticut, the number of insurers is now down to
Initial numbers have shown that the number of customers signing
up will increase. There are also indications of a rise in
premiums. Eventually, much will depend on the success of
Obamacare but the decision to selectively choose state exchanges
is meant to counter a situation in which the number of users
signing up remains low.
3 Great Choices
If Aetna and Humana continue the trend set by UnitedHealth, they
may become the best choices from the insurance sector. These
three are also essential additions when it comes to investing in
the healthcare sector.
As discussed earlier, UnitedHealth has not disappointed investors
hugely with its earnings numbers. In fact, it has increased the
lower bound of its earlier 2013 EPS forecast. It now expects
earnings per share of $5.40 to $5.50. The company continues to
state that its 2013 revenue expectation is $122 billion.
UnitedHealth holds a Zacks Rank #2(Buy) and has expected earnings
growth of 9.85%. The forward price-to-earnings Ratios (P/E) for
the current financial year (F1) is 13.03.
Next up we have Aetna. The company has recently formed an
Accountable Care Organization with WellSpan Health. This is in
keeping with the company's efforts to improve safety and quality
of patient care and reduce the costs of healthcare.
Aetna has also acquired Coventry this year, which has resulted in
multiple benefits for the company. Currently the company holds a
Zacks Rank #2(Buy) and has expected earnings growth of 11.94%. It
has a P/E (F1) of 10.90.
Ourthirdchoice isHumana. Recently, it has entered into a
partnership with prominent home health service provider Valued
Relationships Inc. The association with Valued Relationships will
reduce the serious long term effects of medical emergencies faced
The company has also entered into strategic alliances with the
likes of Boehringer Ingelheim Pharmaceuticals, and
Greenway Medical Technologies Inc.
) Besides a Zacks Rank #2 (Buy), the company has expected
earnings growth of 10.56%. It has a P/E (F1) of 10.65.
Though the introduction of Obamacare has radically changed the
healthcare insurance environment these three choices are large
companies with the ability to tide over such choices. All of
these three choices would make good additions to your