The healthcare space faced another huge blow on Thursday when the largest U.S. health insurer UnitedHealth Group (UNH – Analyst Report) slashed its full-year outlook, citing larger-than-expected loss from the Affordable Care Act or Obamacare.
The company has been struggling from deteriorating individual exchange product performance and has lost hundreds of millions of dollars on the program. As a result, it scaled back its marketing efforts for the products in 2016 and could entirely quit Obamacare after 2016.
The insurer also revealed that the longevity and growth of Obamacare is diminishing with many people dropping the policies after receiving the Medicare service as per their coverage. As a result, UnitedHealth projects a loss of up to $425 million or 26 cents per share from the Obamacare plans in 2015 (read: Obamacare is Here to Stay: 3 ETFs to Buy).
Given the loss from the program, the company cut its earnings per share guidance to $6 from $6.25–$6.35 for the current fiscal year and provided earnings per share guidance of $7.10–$7.30 for fiscal 2016.
Market Impact
Following the move, UNH shares moved down as much as 6.5% on the day to finally close down 5.6%. It has also sparked broad-based concerns over the sustainability of the Obamacare law and shaken the broad healthcare space, especially the health insurers. Anthem (ANTM – Analyst Report), Aetna (AET – Analyst Report), Humana (HUM – Analyst Report) and Cigna Corp (CI – Analyst Report) have lost 6.9%, 6.5%, 4% and 5.4%, respectively.
The terrible trading in the stock world also sent the healthcare ETFs’ space into deep red on the day. In particular, iShares U.S. Healthcare Providers ETF (IHF- ETF report) stole the show plunging 4.2%, followed by declines of 3.1% for SPDR S&P Health Care Services ETF (XHS – ETF report) and 2.8% for PowerShares Dynamic Healthcare Sector Portfolio (PTH – ETF report).
Below we profile these ETFs in detail and discuss some of the specifics behind their recent slump (see: all the Health care ETFs here):
IHF
This ETF provides exposure to 52 companies that provide health insurance, diagnostics and specialized treatment by tracking the Dow Jones U.S. Select Healthcare Providers Index. About half of the portfolio is dominated by managed care firms while healthcare services and healthcare facilities round off the top three. The crushed stocks – UNH, AET, ANTM, CI and HUM – are among the top six holdings that collectively accounts for 36.1% of assets.
Leave A Comment