Goldman Sachs expects optimistic outlook for UnitedHealth Group, Anthem, and CVS in 2022
Global investment bank Goldman Sachs (Goldman Sachs) released a lengthy inaugural report on Tuesday, launching a report on the stocks of listed US medical insurance companies. The report is generally optimistic about the industry’s prospects.
Goldman Sachs began to cover 10 insurance companies, half of which received a “buy” rating in the latest report: UnitedHealth Group, Anthem, CVS Health, Molina Healthcare and Alignment Healthcare. The other four were rated as “neutral”: Humana, Cigna, Centene and Bright Health Group. Only one, Oscar Health, received a “sell” rating.
Goldman Sachs analysts Nathan Rich and Lindsay Golub wrote that they expect the earnings per share of large managed healthcare institutions to increase by 13% between 2022 and 2023, more than double the 6% expected earnings growth of the S&P 500.
The analyst wrote: “The growth momentum behind value-based care and the efforts to diversify services to providers enable MCOs to begin to bend the healthcare cost curve and capitalize on new profit streams.”
Rich and Golub, who did not respond to requests for comment, said they believe that as patients return to service, insurance companies’ medical expenditures will gradually — and arbitrarily — move in a normal direction in 2022, although due to hospital staffing restrictions, the use of Rates will remain low, continue to defer care and move to a lower cost environment. They pointed out that insurance companies have conservatively priced their plans to consider return to care and ongoing COVID-19 treatment and testing.
According to a Goldman Sachs survey of 50 employee welfare managers of all company sizes, employee welfare managers expect medical costs to increase by 5.8% in 2022, compared with 5.3% in 2021. This year’s growth figure is higher than 2020’s 4.8%.
UnitedHealth Group, as the employer of their insurance company, estimates that they will see the highest medical cost increase in 2022, reaching 6.8%. Aetna is part of CVS, and employers expect the lowest growth rate at 4.4%.
The report spent a lot of time delving into the major profit opportunities for Medicare Advantage described by the author. Analysts said that the $350 billion market for senior insurance plans can take advantage of the need for primary care, additional headcount space, and strong bipartisan support at the policy level.
Goldman Sachs emphasized that UnitedHealth Group and Humana have particularly high profit potential in MA because of their ability to manage medical costs through their provider assets. Analysts pointed out that having a supplier is the most capital-intensive value-based care model, but it is also the most profitable. UnitedHealth Group is doing this through its OptumCare and Humana through its advanced healthcare group CenterWell and its private equity joint venture focused on health insurance. Primary care partners.
CVS will also benefit from MA through the planned launch of up to 350 primary care clinics, which may allow it to occupy 36% of the addressable market.
The report also hinted that if the plan cannot save costs or improve quality, the government will further supervise the plan. This may take the form of lowering interest rates or changing risk codes.Just a few months ago, a senior official at the Center for Medicare and Medicaid Services Question the future of MA payments After a report by the government regulator found that these plans made their members look worse than they actually were, in order to maximize payments.
According to the report, the positive factors that insurance companies may face may include rising interest rates, inflation and the supportive policy background before the medium term.
Analysts attribute their sell rating to Oscar due to the risks it faces from new competition in key markets. They stated that the largest markets for the Affordable Care Act health insurance exchange programs—Florida, California, and Texas—have seen an influx of new entrants, which has caused damage to existing insurance companies. On Tuesday, Oscar’s stock price plummeted by more than 20%. The company did not respond to a request for comment.