Meanwhile, shares of UnitedHealth Group were
little changed Monday morning. The health insurance giant was the subject of
negative comments from analysts at BMO Capital, who also cited Humana as
suffering from some of the same headwinds.
BMO Capital cut its rating on the two insurers
from outperform to market perform, and the primary reason had to do with their
Medicare Advantage offerings. Medicare Advantage is an alternative to
traditional Medicare that private health insurers can offer, with guidelines
for minimum coverage options set by the federal government. These programs have
been profitable for insurers, but BMO Capital fears that calls for healthcare reform could
jeopardize the relatively rich profit margin figures that health insurers have
collected from offering Medicare Advantage programs.
UnitedHealth in particular has
concentrated much of its attention on Medicare Advantage, and it's been highly
successful at wooing new customers. With demographic trends seeing a flood of
baby boomers reaching retirement age, growth in the Medicare category looks a
lot more attractive than the private sector.
There's plenty of uncertainty about what will
happen with healthcare reform in Washington. Despite analyst calls to the
contrary, UnitedHealth has weathered past storms, and long-term investors might
well conclude it will be able to do so again this time.
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