ETF Trends
ETF Trends

Once one of the high fliers among health care exchange traded funds, due in large part to the Affordable Care Act or Obamacare, the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) has followed the broader health care sector lower in recent weeks, but that does not mean the ETF’s run is over.

As the Affordable Care Act adds millions into the healthcare system, the increased demand for health products and services are supporting the momentum in healthcare-related exchange traded funds.

The healthcare sector fundamentals look favorable. According to actuaries at the Centers for Medicare and Medicaid Services, American spending on all healthcare increased 5.5% in 2014 year-over-year and is expected to grow 5.3% this year, reports Louise Radnofsky for the Wall Street Journal.

Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.

Additionally, the actuaries calculated that around 8.4 million Americans became insured in 2014 and noted their increased use of medical services. The number of people on Medicaid is projected to increase to 78.1 million by 2024, outstripping Medicare, which is expected to have 70.3 million enrolled.

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.

“Recently Hilary Clinton announced her plan to try to control and lower the costs of prescription drugs. If prescription drug cost controls were to be put into place, health insurers would be the big winner in my opinion. If prescription drug costs are significantly reduced under the type of plan proposed, do you think health insurers would pass that cost savings to consumers? In my opinion there is no way that health insurers would pass these cost savings onto consumers through lower premiums. Therefore, if premiums remain the same and/or continue to grow and insurers have to pay less for prescription drugs their margins would expand significantly,” according to a Seeking Alpha post.

iShares U.S. Healthcare Providers ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.