UnitedHealth Group Inc. (NYSE:UNH), the nation’s largest health insurer, isn’t jumping in head-first. Stephen Hemsley, UnitedHealth Group Inc. (NYSE:UNH)’s CEO, expressed concerns that the first enrollees in the Obamacare exchanges could be the most costly. Because of this possibility, the insurer is participating in only 12 exchanges in the first year. Earlier this year, Hemsley indicated that UnitedHealth Group Inc. (NYSE:UNH) could market its products in as many as 25 exchanges.
Aetna Inc. (NYSE:AET), like UnitedHealth Group Inc. (NYSE:UNH) and CIGNA Corporation (NYSE:CI), opted out of participating in California, one of the largest individual health insurance markets. The company, which is the nation’s third-largest insurer in terms of enrollment, is participating in 14 Obamacare exchanges. CIGNA Corporation (NYSE:CI) has indicated that it will participate in a grand total of five exchanges.
WellPoint, Inc. (NYSE:WLP) stands out among its peers with a different take. The country’s second-largest insurer plans to participate in California and in all of the states where it operates.
In my view, a cautious approach makes a lot of sense. I think the White House is correct that several million young adults must enroll for Obamacare to succeed. I also suspect that many of the country’s younger citizens will forgo health insurance for financial reasons even with the subsidies that are available. What I question, though, is whether the issues will be severe enough to result in the ominous “death spiral.”
With that in mind, the more tentative insurers could be the better investing choices. UnitedHealth Group Inc. (NYSE:UNH), in particular, seems positioned well. It’s taking a cautious stance on the Obamacare exchanges. I also like its fast-growing Optum business segment that provides health management, consulting, technology, and pharmacy benefits management services. This large company seems unlikely to be sucked into a “death spiral” if one happens. And that’s still a big “if” at this point.
The article The Coming Obamacare “Death Spiral”? originally appeared on Fool.com and is written by Keith Speights.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint and owns shares of WellPoint.
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