The PPACA's commercial medical cost ratio floors depressed margins in 2011. There is a risk that the floors could be raised in the future, creating an ongoing margin headwind.It is essential for WellPoint to stay ahead of shifting medical cost trends. Given WellPoint's slim margins, a sudden
Volatile margins create a high degree of uncertainty around Amerigroup's fair value.
Purchasers of health insurance are extremely price-sensitive. Aetna may lack the scale in regional markets to negotiate the best prices with health care providers.Several components of health reform--such as new industry taxes and explicit limits on managed-care profitability--are negatives for
We like Humana's strategic vision but are wary of its reliance on Medicare.
UnitedHealth has positioned itself for success regardless of how the healthcare marketplace evolves.
The generics wave has driven higher margins for Express Scripts, but will largely end after 2014. The company will have to find new ways to create value for clients.The managed-care, retail pharmacy, and pharmaceutical manufacturing industries are all in a consolidation phase. Larger customers and
Medco's biggest customer, UnitedHealth, accounted for 17% of the company's revenue in 2011. Medco recently announced that UnitedHealth will not be renewing its contract when it expires in 2013.The Express Scripts transaction could be rejected by regulators. Recent contract losses have created
Expansion into Medicare and emerging health reform risks make us nervous about Cigna.
Centene could improve its competitive position by better leveraging administrative costs.
The tailwinds of health-care reform could benefit Magellan Health Services.