3 Healthcare Stocks To Stay On Your Watch List For 2H19

A recent news caused a stir amid healthcare insurers as politician Senator Bernie Sanders demanded abolishing private health insurance and opting for Medicare-for-all. He wants private coverage to be replaced by a single national government insurance plan for every American, which raises a concern for the industry players.

Moreover, a few days back, President Donald Trump issued an executive order that requires hospitals to disclose the pricing to patients for various services and products. Insurers here are at a loss, since hospital pricing to a large extent is dependent on contracts between both health care providers. Divulging such details would unveil the pricing differential charged by insurers to hospitals and the final costs in the consumers' hands, thus restricting insurers to make profits.

Despite all these disturbances, the healthcare insurance industry has been witnessing steady growth over the past years on the back of aging population, easing regulation, changing U.S. demography, etc. Constant demand for Medicare and Medicaid business has helped the players achieve a growing revenue base despite regular shackles within the industry. The last few quarters have also noticed new entrants joining the industry and consolidation within the space. Mergers and acquisitions are leading to affordable and transparent services, resulting in better health outcomes.

Now let’s discuss about the major factors driving the industry.

Factors Influencing the Health Insurance Industry

Boom of Medicaid Business: The industry has been constantly driven by rising demand for Medicaid business. As a result of Affordable Care Act or ACA-driven expansion, more and more states are opting for managed care to rein in elevated costs. Demand for Medicaid is projected to be consistent going forward on the back of program extension and the changes in people’s requirements in the managed care network. The business would likely be boosted by an upsurge in the needs of elderly populace, generating solid contribution in the health insurance industry.

Demand for Medicare Advantage Business: Moreover, the emphasis on Medicare Advantage is rising by the day, which can mainly be attributable to a mutable U.S. demography. The Medicare Advantage plans or MA plans are a great substitute for Government-sponsored Medicare plans to address the retirees. The providers in this segment are likely to enhance the quality of plans to meet customers’ evolving demands.

If the standard of benefits and quality of care under Medicare Advantage plans continue to progress, the enrollment would likely shoot up as well irrespective of the pricing.

Merger and Acquisition Activity: High healthcare spending and demand for value-based care are pushing the companies to take up merger and acquisition activity to gain efficiency and reduce costs. The deals have aided the companies to improve efficiency as well as boost health outcomes through higher volumes. One of the recent deals in the space is Centene Corporation (NYSE:CNC) , which will buy WellCare Health Plans, Inc. (NYSE:WCG) for $17.3 billion.

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Digital Innovation: Players in the industry steadfastly seek greater technological investment and innovation to curtail wastages and curb costs. Companies are looking for assistance from blockchain platforms, artificial intelligence, analytics, informatics, etc. to simplify healthcare and enhance their efficiencies.

All these factors poise the industry well for growth with ample opportunities awaiting the players.

In a year’s time, the Zacks Zacks Investment Research

Written By: Zacks Investment Research