Seeking Alpha: With Medicaid And ACA Squared Away, Anthem Needs To Work On Medicare

One of the giants of the health insurance space, Anthem (NYSE:ANTM) does a lot of things well. The company has leveraged its experience in small group underwriting to become the most profitable public exchange player and its acquisition of Amerigroup established a leading position in Medicaid. Although Anthem remains a good commercial insurer, its weak performance in Medicare Advantage (or MA) is a notable weakness and likely a priority target for management over the next few years.

The ACA hasn't really hurt Anthem, nor other large players like UnitedHealth (NYSE:UNH), Aetna (NYSE:AET), and Humana (NYSE:HUM) and I see little remaining risk there unless political and legal maneuverings threaten to utterly overturn the system. The biggest question I see for Anthem then is how they go about improving their MA positioning - will this be a slow, mostly organic, multiyear process, or will the company look to scoop up Humana? I don't see a lot of undervaluation in these shares today unless it can grow behind a mid-single digit rate, but I think it is a reasonably solid core holding with upside to an improved MA position down the road.

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With Medicaid And ACA Squared Away, Anthem Needs To Work On Medicare

Seeking Alpha: Good Execution Continuing To Boost UnitedHealth

UnitedHealth (NYSE:UNH) is the biggest player in managed care and, in my opinion, the best-run. Management has not only established a long history of "under-promise, over-deliver", but has built up a strong technology infrastructure that allows the company to price risk better, coordinate care more efficiently, and drive consumer behavior. Optum remains a real growth opportunity, as does international expansion.

The entire managed care space had a pretty good 2014, with stocks like Anthem (NYSE:ANTM) up more than 60%, Humana (NYSE:HUM) up nearly 60%, and Health Net (NYSE:HNT) up 65%. Only in that context is UnitedHealth's 50% appreciation over the past year something that might rankle investors. Health care, and by extension managed care, is likely to remain a controversial political topic in the years to come and UnitedHealth isn't particularly cheap right now, but I wouldn't be in a big rush to sell.

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Good Execution Continuing To Boost UnitedHealth