There is no denying that The Affordable Care Act, or ObamaCare, has been rewarding for those owning the stock of health insurance companies such as UnitedHealth Group (NYSE: UNH), Cigna Corp. (NYSE: CI), and Humana (NYSE: HUM).
That is ironic as many thought that ObamaCare was designed to be the first step to a single-payer plan, where the government pays for all of the medical costs. If that happened, the health insurance industry would be gone. Many thought that The Affordable Care Act would lead to that end result.
But that is certainly not the opinion of Wall Street, based on the performance of health insurance stocks.
For the last year, UnitedHealth Group is up nearly 40 percent. Over the same period, Cigna has risen by almost 30 percent. Humana Inc is trading higher by more than 44 percent for that time segment (chart below).
While that is great for those who owned those stocks over that period, investing is the art of buying the future income stream of an asset.
Based on the number who enrolled for by March 31 for health insurance coverage though an ObamaCare health exchange, that is bullish for the industry. More than 7 million signed up for coverage, topping the estimates. In addition, there are still tens of million more who are uninsured in the United States, according to a recent study by The Commonwealth Fund.
The recent performance of Cigna, Humana, and UnitedHealth Group certainly reflects that.
For the last month, Human is up more than 2 percent. Cigna is trading higher by more than 4 percent for that period. UnitedHealth Group has jumped by nearly six percent for the last four weeks.
Obviously, Wall Street does not anticipate a single-payer system anytime soon.
For investors looking for the long term, The Commonwealth Fund estimates that there are about 80 million underinsured Americans. That is plenty of new customers for the health insurance industry. Based on the performance of the stocks, Wall Street certainly does not see a threat to Cigna, Humana, and UnitedHealth Group from The Affordable Care Act!
