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Profit or Loss from Obamacare: Insurers and You – Aetna Inc. (AET), Cigna Corporation (CI)

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So elections have consequences. Any old political watcher (that’s me, for those of you playing at home) knows that. It’s even become a bit of a catchphrase in Washington over the last few years. And last year’s election certainly will have consequences.

One of the biggest consequences that last election day had is that it ensures that the Patient Protection and Affordable Care Act, or Obamacare as it’s known in common parlance, is coming to pass. A great deal of powder was spent trying to unseat the president precisely to prevent Obamacare. That didn’t happen and things are beginning to move forward with it.

Look, I don’t care what anyone thinks about the plan. You may love it, you may hate it. You may be frothing at the mouth because of it. But it’s happening. So it’s time for people to get used to it and begin to make plans based on its coming to pass in all of its ways. That means looking at investments with that in mind.

UnitedHealth Group IncThe latest warning shots about Obamacare concern “rate shock.” Major insurers are floating the idea that, with the new coverage requirements, rates for health care could climb as much as 50% quickly. Most of that hike will be for individual plans required to be offered through the new exchanges, but some may pass through to employer provided plans as well. With that in mind, I thought I’d look at some insurers with a thought to how those firms will be affected.

UnitedHealth Group Inc. (NYSE:UNH)

According to 2008 data, UnitedHealth is the biggest collector of health insurance premiums in the country. That’s not a bad place to be when the number of people needing to buy insurance is about to spike. Even with the exchanges trying to organize things UNH has a significant advantage in terms of ability to handle a large influx of new insureds if it wants.

The firm has seen steady revenue growth and has increase 220% since the recession. It’s also increased its dividend three times since then and its yield is at 1.48%. Not great but good. I think UNH will do well in the upcoming expansion of health insurance.

Aetna Inc. (NYSE:AET)

Aetna is the fifth largest provider of health insurance benefits in 2008, according to the numbers I found. It’s a large provider with a lot of room to absorb new business. However, Fitch, which provides ratings for insurers, recently kept Aetna on status “Rating Watch Negative” due to Aetna’s leverage and other issues concerning the acquisition of Coventry Health Care. That acquisition is planned to close in mid-2013 and it’s worth watching to see that it does.

Like most insurers, Aetna’s shares have done well since the crash, growing from $20.22 in March 2009 to $49.20 now. And again the company offers a good-not-great dividend of 1.69% that has been raised three times since then. The uncertainty around the acquisition make Aetna a wait-and-see compared to others on this list.

CIGNA Corporation (NYSE:CI)

It seems strange to write it, but I included Cigna in this list so it wouldn’t be just monster firms. Cigna is another well-known company in the health insurance area but compared to Aetna or UnitedHealth it’s tiny.

Still, it’s an interesting pick up if you’re into it. The firm just raised its guidance for 2013 a bit and shares have spiked as a result. EPS is good at 5.24 and the shares have gone up over 400% since early 2009. But it offers a pitiful dividend yield of 0.07% and that’s sort of a turnoff for me. Cigna is where you should put a limited amount of patient money. This is a long-haul investment and not one you want to count on for both growth and income.

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