Can Health Insurers Continue To Look Past ACA Threats In Q4?

President Donald Trump’s plans to repeal and replace the Affordable Care Act (ACA) or Obamacare have created quite an uproar among health insurers. ACA has been contributing significantly to health insurers’ top line.

Despite the volatile regulatory scenario, health insurers recorded a solid third quarter and continue to remain profitable picks for investors.

Health insurance bigwigs like Humana Inc (NYSE:HUM) , Aetna Inc (NYSE:AET) , Anthem Inc (NYSE:ANTM) , UnitedHealth Group, Inc (NYSE:UNH) have seen solid growth in the top and bottom line as well as membership in the third quarter. Their strong capital position also reflects profitable operations.

Business diversifying strategies with primary focus on ancillary services and products have also boosted the revenue base.

Q4 Trends

Continuously rising demand for government plans, especially Medicare and Medicaid, continues to favor health insurers. Hence, revenues of the companies offering these plans are likely to witness a consistent improvement in their government businesses.

Moreover, an aging U.S. population that has boosted the overall demand for medical coverage is likely to prove favorable.

ObamaCare has significantly benefitted the industry through a reduction in uninsured population, boosting medical enrollment and aiding bad debt management. This trend is likely to drive the fourth-quarter results as well.

A diversified product portfolio along with proposed mergers and consolidations are also likely to accelerate growth for health insurers in terms of global expansion as well as strengthening of foothold in existing markets.

However, the companies have been facing higher losses on public exchanges that have compelled them to scale back operations or plan an exit from the business.

Moreover, health insurers have been seeing escalating operating costs related to regulations, investments in information technology along with fees and taxes that continue to hurt profits. The companies, however, are trying to tackle the rise in costs with the help of Accountable Care Organizations (ACOs).

Stocks to Consider

Despite the challenges, the health insurance ndustry has gained nearly 8% quarter to date, outperforming the S&P 500 average of 3.5%. The Health Maintenance Organization industry is among the top 10% of the Zacks-ranked industries.

We have boiled down on three stocks that have outperformed in the third quarter and have also seen upward estimate revision in the last 30 days. Moreover, these stocks have maintained a solid quarter-to-date performance.

Triple-S Management Corporation (NYSE:GTS) is one of the leading managed care companies in the United States that delivered a positive earnings surprise of 327.8% in the recently reported quarter. The Zacks Consensus Estimate for its 2017 earnings has being revised 43% upward, while the same for 2018 increased 10.6% over the last 30 days. The company’s shares have rallied 17.4%, outperforming the industry. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

WellCare Health Plans, Inc. (NYSE:WCG) is a managed care company in the United States that delivered a positive earnings surprise of 114.7% in the last reported quarter. The Zacks Consensus Estimate for its 2017 earnings rose 17%, while the same for 2018 increased 8% over the last 30 days. The stock has rallied 17.2%, beating the industry mark. The stock also sports a Zacks Rank #1.

The Joint Corp. (NASDAQ:JYNT) offersnationwide network of chiropractors. The company delivered a positive earnings surprise of 50% in the recently reported quarter. The stock has seen the Zacks Consensus Estimate for 2017 earnings rise 17% over the last 30 days. The same for 2018 has increased to 6 cents from a breakeven expected 30 days back. The company’s shares have rallied 13%, outperforming the industry. The stock carries a Zacks Rank #2 (Buy).

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