The nation’s five largest health insurers all have outperformed the S&P 500, which is up 151 percent since early 2009. Among them, shares of Cigna, Humana and UnitedHealth Group have risen at least twice as fast.
Insurers have lured investors back to their stocks by increasing their quarterly dividend payouts substantially and by reporting earnings that regularly exceed Wall Street expectations. Health care costs have generally grown at a more moderate pace since the Great Recession and that has helped the balance sheets of many insurers.
Investors also have realized that the overhaul won’t cripple managed care. Health insurance stocks experienced months of price swings before the new health care law emerged from Congress in 2010. Investors fretted over possible competition from a government-funded insurance option.
Citi financial analyst Carl McDonald says a push by some employers to move their employee health coverage to private exchanges might benefit managed care stocks. Large employers typically pay their own claims and hire insurers only to administer the policies. Some companies, such as Walgreen, are shifting to fully insured plans in which the managed care company pays the claims as well. That could deliver big revenue gains for these companies.