ACA's effect on Healthcare Insurance companies

Health Insuance Companies dropped a few % on the announcement of ACA being upheld.

From people I’ve spoken with, the biggest detriment is the new mandatory MLR (Medical Loss Ratio) of 80% or 85%. The MLR is the amount paid out (the losses)/ total premium dollars taken in.

In the past, depending on the insurance product, MLR’s generally ranged from 40% to 90%. If say an insurance product had a MLR of 60%, then around 15% G&A expenses, they’d be taking in a 25% profit. Now, if this happens, they will have to give out rebates. I believe it’s the entire difference, so 20% back to the consumers.

Overall, I am not too familiar with the bill in its entirety or this industry. Anybody here have experience analyzing these companies?

Thinking about health insurance, from both a consumer and investor point of view, makes my head hurt.

I haven’t even considered touching most healthcare stocks since Obamacare was passed. I did make a good return on CERN though thanks to the stimulus bill and its related effects…

Here’s an article I read a couple days before the Supreme Court ruling. I thought a lot of the high-level takeaways were on-point and maybe you’ll find it informative too. I don’t cover hospitals or medical services to have an informed opinion on specific companies, but I do cover companies on the products side so excise taxes and coverage as they stem from ACA can be relevant.

www.investopedia.com/stock-analysis/ETFDatabase/ObamacareHealthCareETFsWhatYouNeedToKnow.aspx