Health Benefit Providers Face Uncertain Future

by: Mike Havrilla

The table below (click to enlarge) contains 36 companies included in the ETF Innovators Health Benefit Providers Index. Many of the companies included in this index face an uncertain future with the prospect for healthcare reform threatening the profit margin of managed care companies; although the prospect for universal health insurance promises increased volumes as more Americans gain coverage.

The index contains retail pharmacies such as Rite Aid (NYSE:RAD), pharmacy benefit managers such as MedcoHealth Solutions (NYSE:MHS), managed care companies such as UnitedHealth (NYSE:UNH), supplemental health insurers such as Aflac (NYSE:AFL), hospital pharmacy operators such as PharMerica (NYSE:PMC), workers compensation insurers such as Amerisafe (NASDAQ:AMSF), and specialty health service providers such as Healthways (NASDAQ:HWAY).

The Health Benefits Index posted an average loss of about 37% in the past year on an equal-weight basis, which is similar to the S&P 500 SPDR (NYSEARCA:SPY) loss of 36%, but worse than the 25% loss for the Healthcare Sector SPDR (NYSEARCA:XLV). The closest benchmark ETF to this index is the iShares Dow Jones U.S. Healthcare Providers (NYSEARCA:IHF), which fared the worst with a loss of nearly 46% in the past year.

Only four companies in the index managed to post a stock price gain in the past year, including PMC, Omnicare (NYSE:OCR), AMSF, and America Service Group (NASDAQ:ASGR). The group of gainers carried a common theme of providing specialized health benefit services, including

  • PMC – an operator of hospital pharmacies,
  • OCR – pharmacy services and distribution for long-term care facilities,
  • AMSF – workers compensation insurance,
  • ASGR – managed care services for correctional facilities.