The Affordable Care Act is a laudable attempt to fix many issues relating to affordable access to medical care. And the news is full of the problems related to the roll out of the system. Insurance companies and Health Maintenance Organizations are central to the Affordable Care Act as these companies have had to rewrite their insurance plans both for what items are covered, how much plans will cost, and the types of co-payments that will be included. From an investing viewpoint we look at a possible UNH Stock Response to Obama Care problems. UNH is the stock symbol for United Health. Along the way to the kickoff of Obama Care roughly five million health insurance subscribers were told that their health insurance plan no longer existed and that they needed to buy another, by way of the Affordable Care Act website. The site is in the news because of programming errors. Now we hear that letting people have the option to stay with their current plan is creating a nightmare for insurers. Our question for investors to consider as an example of investing in this sector is what will be the UNH stock response to Obama Care problems. How does one do fundamental analysis of UNH and other related stocks when the Obama Care marching orders seem to change day by day?
What is UNH?
Paraphrased from Google Finance this is a description of UNH:
UnitedHealth Group Incorporated (UnitedHealth Group) is a diversified health and well-being company. The Company operates in four segments: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State; UnitedHealthcare Community & State; OptumHealth; OptumInsight, and OptumRx. The Company operates these businesses across eight markets: integrated care delivery, care management, consumer engagement and support, distribution of benefits and services, health financial services, operational services and support, health care information technology and pharmacy.
United Health Group started out as a physician based health maintenance organization (HMO) in Minneapolis. It has morphed bit by bit into a major player in the health insurance market. The company saw the opportunity for profit in the HMO business but operated in Minnesota where it is illegal for an HMO to be a for profit enterprise. The company broke up into a health treatment arm and a management arm. The management arm is now a national entity and provides information and management services to many other health insurers and HMO’s.
UNH Stock Response to Obama Care Problems
It is a major player in helping insurers decide how to set up their plans and payment options under Obama Care and has spent a significant amount of money setting up computer systems to track care and payments. If Obama Care gets scrapped as most the Republican Party and many voters wish UNH will have wasted a lot of money on nothing. It will have to rewrite many of its own plans and will have to generate information to help its own clients readjust to a post Obama Care world. Or if the system is merely modified UNH will have to readjust as needed.
In the last 15 years UNH grew from a $4.50 stock to a $75 stock with three two for one splits along the way. The stock reached $60 in 2005 but fell to the $20 range with the 2008 market crash. It has since grown steadily back to its $70 + niche. When the Obama Care rollout proved to be faulty the stock fell below $70 but has since recovered to nearly $72. From the viewpoint of value based stock investing this company is well established in each of it niches which gives it a good margin of safety and as it profits from both increased dollars spent on health care and savings on health care it has good intrinsic value. However, in the short term the UNH stock response to Obama Care problems could be bumpy with repeated drops. If one believes that the company will prosper long term it might be wise to profit from a stock selloff by purchasing the stock on each retreat.