We recently compiled a list of the Top 10 Health Insurance Stocks To Buy. In this article, we are going to take a look at where Humana Inc. (NYSE:HUM) stands against the other health insurance stocks.

The health insurance industry is constantly changing, driven by a movement towards consumer-driven healthcare, in which people actively control their own health and healthcare costs. In that sense, Fortune Business Insights projects that the global healthcare insurance market is estimated to be worth $2.14 trillion in 2024 and will grow from $2.32 trillion in 2025 to roughly $4.45 trillion by 2032, reflecting a 9.7% CAGR over the forecast period.

AI in Health Insurance

According to McKinsey, health insurers might benefit significantly from completely incorporating AI and automation into their business operations. The firm believes that for every $10 billion in revenue, insurers could save $150 million to $300 million in administrative costs and $380 million to $970 million in medical expenses. In addition, these technologies may create an additional $260 million to $1.24 billion in income.

That said, concerns regarding AI’s expanding role in health insurance, particularly around claim denials, have escalated in recent months, especially in light of the death of UnitedHealthcare CEO Brian Thompson. These concerns had previously pushed the Biden administration to establish optional operational agreements with insurers, payers, and providers in 2023. In 2024, an executive order was issued to create criteria and safeguards for AI implementation. However, in January of this year, the Trump administration revoked Biden’s AI mandate, proposing that a new action plan be developed by the middle of the year.

Commenting on the rising implementation of AI in health insurance, law firm Maynard Nexsen stated:

“The AI landscape continues to develop, and the regulations appear to be loosening — at least at the federal level. These changes have led to uncertainty among organizations using AI technology.”

Medicaid Concerns

Medicaid, the nation’s largest health insurance program, which covers more than 70 million people, could be slashed under House Republican proposals. Lawmakers are proposing cutbacks of up to $2.3 trillion over the next decade to help fund border security and extend President Trump’s 2017 tax cuts. As the government works to decrease federal debt while maintaining expenditure commitments, Medicaid remains a key priority. To further expand on the implications of such a move, it should be noted that the Affordable Care Act (ACA) has considerably expanded the program’s scope and expense, making it the principal provider of comprehensive health and long-term care for one in every five Americans and accounting for approximately $1 out of every $5 spent on healthcare.

Furthermore, House Republicans just passed a budget by a slim margin, requiring the Energy and Commerce Committee, in charge of federal healthcare, to reduce $880 billion in expenditures. The reductions are designed to help support Trump’s tax cuts, mass deportations, and defense spending.

Our Methodology

For our list of the best health insurance stocks to buy, we started with a list of stocks pulled from ETFs, stock screeners, and web rankings. We then utilized Insider Monkey’s Q4 2024 database to discover the top ten stocks held by hedge funds. The list is organized in ascending order of hedge fund sentiment around each stock.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Humana Inc. (NYSE:HUM)

Number of Hedge Fund Holders: 64

Humana Inc. (NYSE:HUM) is focused on improving health and well-being by providing a variety of healthcare benefits to its medical and specialty members. These include fully insured medical and specialty health insurance that covers vision, dental, and supplemental health benefits, as well as administrative services only (ASO) packages for individuals and employers.

The fourth quarter of 2024 marked the end of a difficult year for Humana’s financial performance. However, the company’s fiscal year 2025 outlook shows a reversal, with adjusted EPS of at least $16.25, slightly below the average prediction of $16.78. Revenue predictions for FY25 range between $126 billion and $128 billion, significantly higher than the $120 billion average estimate.

Bernstein SocGen reduced Humana Inc.’s (NYSE:HUM) price objective from $322 to $313 on February 20, but maintained an Outperform rating on the healthcare company’s shares. Despite the lower price target, Bernstein SocGen analyst Lance Wilkes indicated ongoing optimism in Humana, predicting a possible 20+% upside. Wilkes emphasized Humana’s ability to gain from recovering Medicare Advantage and Medicaid margins, as well as a stabilization in usage rates, which are projected to return to normal levels.

Overall HUM ranks 8th on our list of the top health insurance stocks to buy. While we acknowledge the potential of HUM as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HUM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.