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Humana Inc HUM

Rating as of

Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Potential Healthcare Policy Changes Create Opportunities for MCOs, Caregivers

Julie Utterback, CFA Senior Equity Analyst

Analyst Note

| Julie Utterback, CFA |

Potential healthcare policy changes look set to expand U.S. insurance rolls through existing programs like the individual exchanges and Medicaid. That expansion provides opportunities for managed-care organizations and caregivers, which should largely offset (even override, in some cases) the potential U.S. corporate tax rate increase needed to pay for various U.S. government initiatives. We have confirmed our moat ratings and adjusted our fair value estimates for these effects, with relatively mild changes for the MCOs and much larger increases for some caregivers related to the latter's more significant margin expansion prospects and leverage that magnified that effect on residual equity values. This view follows our previous research on potential policy changes that highlighted the public option as the key downside risk for these sectors. With the public option not being considered in potential policy changes, we think the policy landscape is rife with opportunity rather than risk for MCOs and caregivers.

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Company Profile

Business Description

Humana is one of the largest private health insurers in the U.S. with a focus on administering Medicare Advantage plans. The firm has built a niche specializing in government-sponsored programs, with nearly all its medical membership stemming from individual and group Medicare Advantage, Medicaid, and the military's Tricare program. The firm is also a leader in stand-alone prescription drug plans for seniors enrolled in traditional fee-for-service Medicare. Humana offers employer-based plans primarily for small businesses along with specialty insurance offerings such as dental, vision, and life. Beyond medical insurance, the company provides other healthcare services, including primary-care services, at-home services, and pharmacy benefit management.

Contact
500 West Main Street
Louisville, KY, 40202
T +1 502 580-1000
Sector Healthcare
Industry Healthcare Plans
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 48,700

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