Healthcare providers and services exchange traded funds look healthy as the Patient Protection and Affordable Care Act raised millions in new medical insurance enrollments.
Over the past year, the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) rose 31.6% and SPDR S&P Health Care Services ETF (NYSEArca: XHS) increased 25.0%.
According to Anthem (NYSE: ANTM), the second-largest U.S. health insurer, Medical enrollment could rise to as many as 38.2 million customers this year from 37.5 million in 2014, Bloomberg reports.
Last week, UnitedHealth Group (NYSE: UNH) said insurance enrollment under the new law was climbing faster than expected.
IHF includes a hefty 14.9% position in UNH and 7.1% in ANTM. XHS, on the other hand, follows a more equal-weight indexing methodology and includes a 2.2% tilt toward UNH and ANTM.
All the new customers means bigger profits for healthcare insurers. For instance, Anthem expects adjusted net income to be at least $9.7 per share this year, compared to $8.85 per share in 2014.
More Americans are enrolling into healthcare plans under the new Patient Protection and Affordable Care Act, or the so-called Obamacare Act, the 2010 law that requires all Americans to hold health insurance. Anthem Chief Executive Officer Joseph Swedish, also pointed out that many new customers are becoming loyal to their chosen insurance company in what he calls “stickiness.” [Rising Services Spending Could Prop Up Healthcare, Tech ETFs]
“Stickiness is real, it certainly has played out as we expected given our entry last year migrating into the second year,” Swedish said in the article.
Additionally, insurers are giving back to investors as they raise dividends and buy back shares. For instance, Anthem raised its quarterly cash payout to shareholders by almost 43% to 62.5 cents per share from 43.75 cents per share Wednesday, reports Tom Murphy for the Associated Press.
iShares U.S. Healthcare Providers ETF
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Max Chen contributed this article.