Skip to content Skip to sidebar Skip to footer

Like a regular prescription of drugs, health insurance has become an inevitable component of the healthcare procedure. In a country like the USA, almost every man with a stable source of income has an option for health insurance. This health insurance could cover the medical charges for themselves as well as their families.

Moreover, health insurance companies offer health protection to its members in exchange for a fixed amount. Usually, the companies collect them annually. A steady upshot of any business sector comes with the confirmation that the stockholders of its companies will eventually have expanded returns.

So, by deciding to invest in Health Insurance stocks, the investor will have an array of companies to choose from. However, before making the final choice, we have prepared a few pointers. They will simplify your understanding and increase the probability of success.

A Thorough Analysis of the Health Insurance Market

There are more than 900 companies registered under the National Association of Insurance Commissioners. Almost all of them focus on providing four essential schemes to their members.

  1. Employer-Sponsored plans – More than half of the total population of America takes a course to this plan.
  2. Private Individual Plans – These plans are for individuals who are not covered by their employers. Moreover, 7% of the whole population is backed up by this plan.
  3. Medicare – An initiative of the US Federal Government. Almost 14% of citizens have subscribed to this plan. People predict it will increase after they reach the age of 65.
  4. Medicaid– These plans are governed by the individual states that help Americans with a considerably low income to avail long-term health insurance. Around 20% of citizens use this plan.

Ensure that Your Prospects are Wide Enough to Prove Fruitful

While investing in health insurance stocks, diligently check the rate of growth that the company will bear on its earnings. The ones whose statistics show that the performance has been steady over the years have a higher chance of proving more profitable.

Choose companies that have various services to offer in the realm of healthcare. By doing so, even if one fails, there is a chance that the other sectors will bear the high value of your investments.

An additional point of advantage would be if the company, along with healthcare, offers services that touch the field of medical procedures. For example, consultations, checkups, and periodic healthcare camps. Such services improve the exposure of the health insurance companies in the market that, in turn, prove beneficial for the stockholders.

Evaluate the Stocks of Health Insurance CompaniesEvaluate the Stocks of Health Insurance Companies

Depending upon the market size and capital of the insurance companies, their stocks either face promotion or stand stagnant with their last year’s performance. According to the outcome of the stock of the current year so far, the top five companies are as follows:

UnitedHealth Group (NYSE: UNH)

3-year earnings growth of 70.8%

an average dividend yield of 1.53%

Anthem (NYSE: ANTM)

3-year earnings growth of 51.8%

an average dividend yield of 1.09%

CVS Health (NYSE: CVS)

3-year earnings growth of 111.2%

an average dividend yield of 3.62%

Cigna (NYSE: CI)

3-year earnings growth of 41.2%

an average dividend yield of 0.2%

Humana (NYSE: HUM)

3-year earnings growth of 174.1%

an average dividend yield of 0.5%

Periodic Revaluation

Even if you are not able to reevaluate the stocks of the company every month, ensure that you conduct a revaluation at the end of every three months. The status of health insurance stocks can be primarily altered.

Especially, if the government introduces any change in Medicare, Medicaid, and private insurances without any prior notice. Also, the companies can collaborate with their acquisitions that work outside of the field of healthcare.

This might lead to a sudden change in numbers. Thereby, it is essential to stay updated. Loom for any upcoming changes that the insurance company is likely to face.

Beware of the Risks Associated with the Investment

Like any other stock market, investing in health insurance too is risky. For example, let’s imagine there is a drop in demand. Although, the risk of experiencing a complete loss is lower when compared to other sectors owing to the ever-existing demand for Medicare.

However, there have been cases where companies have set their premiums at a much lower cost. They failed to cover the medical charges generated by each patient. And this has led to the company’s shut down. Furthermore, there is a chance that the investor might fall into the trap of a fraud claiming themselves to be genuine.

Bottom Line

Do you want to minimize these financial risks? Then you need to conduct intensive research about the company. Also, if you want to increase your chances of success, don’t forget to do the following steps:

  • Develop a general understanding of the health insurance industry
  • Learn the key metrics used by health insurers
  • Understand the risks associated with health insurance stocks
  • Evaluate the top health insurance stocks (Reevaluate periodically as well)

But most importantly, invest carefully.

Leave a comment