Analysts said that whether or not the GOP’s health-reform bill passed this summer or not. The large profit-insurers will still find ways to grow their profit ways and also the business. One can see how they will find the ways to profit because the hospital stocks were also trading higher on Wednesday. Citi also said that the insurers have the perspective to see greater profits in their healthcare or Medicare and Medicaid business.
On Tuesday, Senate deferred a closely watched vote on the bill, which will levy deep cuts in spending on Medicaid. So in the wake of this news, Citi analysts instigated coverage of insurers Humana and Aetna with a buy rating.
To clarify their this comment on insurers the Citi analyst Ralph Giacobbe said in a research note, “When you step back from the uncertainty created by the current political landscape and consider the larger economics around how managed Medicaid helps states to save money and improve outcomes, it is likely to continue to be an indispensable piece of the solution for the future of health care.”
He also said that the Aetna is now pouring 13 percent of its profits from Medicaid, the safety net health program for the poor, and the health insurer is looking to achieve the market part in the program with the recent contract wins in the places Nevada and Virginia. The states look for the different ways to stretch health-care dollars. And Humana derives about 80 percent of its revenue from the Medicare market.
Giacobbe wrote in a research note about Humana, “We expect Humana to capture more than its fair share of this market growth and see the current government backdrop as relatively supportive of Medicare Advantage.”
The reason behind this issue is that one-third of the seniors are now enrolled in private Medicare Advantage plans, the analysts said that the new retirees will more be in the plan and that is the reason this work become employer plans rather than traditional Medicare.