Non-functioning health insurance e-commerce sites have dominated the news about the implementation of the Affordable Care Act, but some portfolio managers have seen opportunity in the chaos. In a recent portfolio manager interview in The Wall Street Transcript, Willem Schilpzand foresees superior returns through an investment in Humana [HUM].
“Humana is a managed care organization, and their largest business is in the Medicare Advantage space, which is the private equivalent of government-provided original Medicare. Humana is the second-largest Medicare Advantage player with approximately 17% market share, and UnitedHealthcare (UNH) is the largest with approximately 20% share,” Schilpzand said.
This low-cost health insurance focus has been a long-term business objective of the Humana senior executive team. This quote is from an interview with Michael B. McCallister, currently the Chairman of Humana’s board but speaking as the Chief Executive Officer in 2004: “As I said earlier, there are big opportunities in the Medicare area and we’ve been in that business for 20 years. We’re the most experienced company in Medicare.”
FOR MORE INFORMATION ABOUT THESE INTERVIEWS CLICK HERE.
In another recent interview with Senior Vice President and Chief Service & Information Officer of Humana Inc., Brian LeClaire, the opportunity for information technology expertise at Humana is further emphasized: “If you were to speak to anyone here at Humana, you would hear that IT is integral to what we do as it enables every interaction we have with our members.”
Humana’s consistent focus on delivering Medicare benefits at a profit is a core competency that portfolio managers are now recognizing as an investment opportunity. This expertise in health care information technology and cost efficiency has created a sustainable competitive advantage for HUM, according to Mr. Schilpzand, and has led to his investment decision.
“Humana’s Medicare Advantage HMO plans provide a 30% savings versus original Medicare, and Humana’s plans on average save close to 17% versus original Medicare. Savings are accomplished through narrower networks and more integrated care, which a government entity would have a very hard time replicating,” Schilpzand said.
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