Health insurers, which delivered better-than-expected first-quarter results, may have potential for more earnings growth before a new health care overhaul regulation begins to have a meaningful impact on their business, according to a Jefferies analyst.
Analyst David Windley upgraded UnitedHealth Group to "Buy" from "Hold" and raised his price target on that company's stock, as well as several others in the sector. Windley said in a Monday morning research note that a new overhaul measure governing the percentage of premiums insurers spend on health care and quality has placed "unexpectedly small constraints" so far on earnings-per-share upsides.
Starting this year, insurers must meet minimum medical-loss ratios or issue rebates to customers. The new rule governing so-called MLRs aims to ensure that a good portion of the premiums an insurer collects goes toward care and not profits or big salaries. But the regulation had worried insurance investors and analysts because it essentially regulates company profits.
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