The Affordable Care Act has helped millions of Americans receive healthcare coverage, with the uninsured rate now at a seven-year low, bolstering the outlook for healthcare services and sector-related exchange traded funds.
In the second quarter, only 11.4% of adults lacked some form of health insurance, a half-percentage point dip from the first quarter, reports Dan Mangan for CNBC.
The uninsured rate has declined almost 6 percentage points since late 2013, before the the ACA, or Obamacare, took effect.
Gallup and Healthways noted that the uninsured rate is at its lowest since the two groups began tracking the metric at the start of 2008. Consequently, the two warned that the rate may not any significant declines from this point forward. Enrollment for 2016 coverage begins on November 1, 2015, and the uninsured rates may dip slightly but less significantly than over the past year – Gallup argued that those who remain uninsured will likely be the hardest to convince.
Nevertheless, with more people in the healthcare system, the healthcare sector will continue to benefit from a larger client base.
For broad exposure, Health Care Select Sector SPDR (NYSEArca: XLV) and iShares U.S. Healthcare ETF (NYSEArca: IYH) provide access to the diversified healthcare space.
Alternatively, investors who want to focus on the increased foot traffic into hospitals can target healthcare services and providers. The iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) and the equal-weight SPDR S&P Health Care Services ETF (NYSEArca: XHS), which includes 36.2% healthcare services, 28.8% health care facilities, 21.4% managed health care and 13.7% healthcare distributors. [Healthcare ETFs: More Americans Are Visiting the Doctor’s Office]
The broad healthcare sector ETFs include less heavy tilts toward the sub-sectors. For example, XLV includes 42.9% pharmaceuticals, 21.1% biotechnology, 19.2% healthcare providers & services, 13.2%, healthcare equipment & services and 0.8% healthcare tech. Additionally, IYH tracks 41.0% pharma, 23.1% biotech, 16.5% healthcare providers & services, 15.2% healthcare equipment & supplies and 3.9% life sciences tools & services.
Moreover, the greater adoption of healthcare insurance may have also strengthened the SPDR S&P Insurance ETF (NYSEArca: KIE) and iShares US Insurance ETF (NYSEArca: IAK). The two broad insurance ETFs include a slight tilt toward the healthcare sector – KIE has a 22.9% position in life & health insurance. The insurance ETFs, though, are mostly gaining this year on the prospects of rising interest rates. [Another Rising Rates ETF Breaks Out]
For more information on the healthcare sector, visit our healthcare category.
Max Chen contributed to this article.