DB Analysts Estimate UNH, WLP and AET to have Highest FEHB Rate Increase
Monday, October 03, 2021 4:13 PM



Analysts at Deutsche Bank believe that Aetna Inc. (NYSE: AET), UnitedHealth Group Inc. (NYSE: UNH) and WellPoint Inc. (NYSE: WLP) have the highest Federal Employee Health Benefits Program rate increases among public MCOs for 2012 while Coventry Health Care inc. (NYSE: CVH) and Humana Inc. (NYSE: HUM).  They maintain Buy rating on shares of Aetna, UnitedHealth and WellPoint with price targets of $53, $59 and $86 respectively.

 

DB analysts state that the average premium increase for all plans in FEHB on a straight-average basis will be 7.6 percent in 2012, down 480 basis points from a 12.4 percent average increase in 2011. They add that FEHB program covers approximately 8 million federal employees, retirees, and dependents and it is the largest single purchaser of Commercial health insurance products, buying $43 billion of health care benefits in 2012. They state that health insurance rates on an enrollment-weighted basis will increase by 3.8 percent in 2012 for FEHB due to low rate increases in the BCBS Standard Option. They add that pricing in FEHB has historically been a leading indicator of broader commercial pricing trends. They expect that commercial rate increases will moderate from the robust increases observed in 2011 due to favorable medical cost trends and fewer incremental new costs for health reform mandates in 2012 as compared to 2011. They add that most of the public MCOs appear to pushing through meaningful price hikes in FEHB for 2012, led by UnitedHealth, WellPoint, and Aetna. They state that UnitedHealth is pushing through the highest average premium increase in 2012 at 12.7 percent, with WellPoint close behind at 12.4 percent and Aetna is also requesting double-digit increases for 2012 averaging 10.8 percent.  They add that Coventry once again tracks as having among the lowest increases in FEHB with an average rate hike of only 3.4 percent. They state that Coventry has now had the lowest premium increases in FEHB among the public MCOs for three consecutive years. They expect the companies like UnitedHealth, WellPoint, and Aetna that are pushing through above market price increases will have an opportunity to improve margins in FEHB in 2012. They believe medical margins could deteriorate for those companies with below average price increases, such as Coventry and Humana.

 

On a year-to-date basis, UnitedHealth has a share performance of 31.82 percent, and as compared to Standard & Poor’s it has an YTD share performance of 45.88 percent. WellPoint has an YTD share performance of 12.65 percent, and as compared to S&P’s it has an YTD share performance of 24.66 percent. Aetna has an YTD share performance of 26.68 percent and as compared to S&P’s it has an YTD share performance of 40.19 percent. Coventry has an YTD share performance of 10.76 percent and as compared to S&P’s it has an YTD share performance of 22.57 percent. Humana has an YTD share performance of 40.81 percent and as compared to S&P’s it has an YTD share performance of 55.83 percent.

 

Shares of UnitedHealth slipped 6.05 percent or $2.79 to trade at $43.35. Shares of WellPoint fell 3.54 percent or $2.30 to trade at $62.95. Shares of Aetna slipped 4.49 percent or $1.63 to trade at $34.72. Shares of Coventry were down 5.83 percent or $1.68 to trade at $27.13. Shares of Humana lost 4.45 percent or $3.18 to trade at $69.55.

 

 

 


 

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