Health Benefit Provider Stocks Seriously Ailing

The accompanying table (click to enlarge) provides statistics and the top seven companies by market cap for the ETFI Health Benefit Providers Index & short ETF proposal of 33 companies with market caps over $100M, which includes all types of pharmacy services (retail, mail order, institutional), pharmacy benefit managers, managed care companies, health insurers, and supplemental health insurance. The 25 lowest rated companies in the index have lost nearly half of their market value in the past year, underperforming the Healthcare Sector SPDR (XLV), iShares Dow Jones U.S. Healthcare Providers (IHF), and the S&P 500 SPDR (SPY).

Former investor favorites in the industry such as Aetna (AET), UnitedHealth (UNH), WellPoint (WLP), and Humana (HUM) have lost more than half of their market value in the past year on concerns of declining profits, Medicare spending cuts, and the possibility for increased government regulation – such as Senator Obama's proposal to mandate coverage of pre-existing conditions.

Other companies included in the index such as Rite Aid (RAD), CVS Caremark (CVS), and Walgreen (WAG) face the prospect of decreased consumer spending and intense competition from the likes of Wal-Mart (WMT) with its extensive $4 generic drug program.

Comments

[searcher:]

Universal 'coverage' and its subset pre-existing condition coverage will be to health 'insurance' as SSI is to 'insurance', excepting no pretense of a self selecting pool is attempted. Those business plans best best able to administer politically necessitated triage will prosper, the others will waste away.

2008 Nov 02 12:16 PM