In this article, we list the 10 best health insurance stocks to buy.
The Healthcare Market: What does the future hold?
2023 posed significant challenges for the healthcare sector as investors adjusted their portfolios to adapt to a higher interest rate environment. This led to the sector underperforming compared to other segments of the equity market, particularly technology and communication services. The disruptive environment has understandably created some anxiety and pessimism about the future. Deloitte’s annual Health Care Outlook Survey reveals that only 3% of health system executives and 7% of health plan executives have a “positive” outlook for 2024, down from 15% and 40%, respectively, marking a significant year-over-year decline.
On the brighter side, the aging baby boomer generation, which constitutes 20% of the U.S. population, is driving a growing demand for healthcare services and products such as insurance, pharmaceuticals, medical devices, and hospital care. Projections indicate a notable increase in healthcare spending over the next decade. In the U.S., the Centers for Medicare & Medicaid Services forecasts a 5.6% annual growth in national health expenditure between 2023 and 2032. Similarly, in OECD countries, healthcare spending as a percentage of GDP is expected to rise from 8.8% to 10.2% by 2030. Alongside aging populations, the expanding middle class in emerging markets will also contribute to heightened demand for healthcare services.
One of the biggest news stories of the year was the rise of GLP-1 drugs as weight loss treatments, leading to significant outperformance by leading developers Eli Lilly & Company and Novo Nordisk (NVO) compared to their peers. Conversely, many companies experienced a severe downturn due to the post-COVID revenue drop, after vaccine and therapeutic sales neared $100 billion in 2022, resulting in challenging year-over-year comparisons. On another front, BlackRock, Inc. projects that the healthcare sector will have the highest 12-month forward earnings growth across all sectors on a year-on-year basis, with sales growth trailing only the consumer discretionary and information technology sectors.
The State of Health Insurance
Health insurance remains a prominent issue, especially in the United States. In 2022, over 300 million Americans, approximately 92% of the population, had health insurance. While the U.S. healthcare system features a blend of public and private insurers, private insurance comes out on top as the predominant form of coverage. That same year, more than half of insured individuals received private insurance through their employer, while approximately 36% were covered by public insurance programs like Medicare and Medicaid.
As of 2023, the US health insurance exchanges, created under the Affordable Care Act in 2014, market their tenth year of operation. Throughout this decade, the individual market has remained interesting, to say the least, having experienced annual fluctuations in insurer participation, pricing, and plan options. According to McKinsey, consumer engagement significantly increased by 25% from 2020 to 2022, reaching approximately 16 million participants, thus aligning with the enhanced subsidies introduced by the American Rescue Plan Act of 2021.
The global health insurance industry is poised for substantial growth in the coming years. According to a report, the global health insurance market is projected to achieve a Compound Annual Growth Rate (CAGR) of 9.9% from 2022 to 2030, reaching a market value of $5.28 trillion by 2030.
Insurance house, car and family health live concept. The insurance agent presents the toys that symbolize the coverage.
Our Methodology
To compile our list of the best health insurance stocks to buy, we sifted through multiple ETFs and internet rankings. We then analyzed Insider Monkey’s Q1 2024 database to select the stocks that were the most widely held by hedge funds. The following companies, ranked by the number of hedge funds holding their shares, provide health insurance services within the United States and/or internationally. Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Health Insurance Stocks to Buy
10. MetLife, Inc. (NYSE:MET)
Number of Hedge Fund Holders: 36
The Metropolitan Life Insurance Company, widely known as MetLife Inc. (NYSE:MET), stands as one of the world’s largest providers of insurance, annuities, and employee benefit programs, serving over 90 million customers across more than 60 countries.
Recently, MetLife Inc. (NYSE:MET) announced a substantial increase in its share repurchase authorization to $3 billion, reflecting a strong first quarter in 2024. The company reported a 20% year-over-year rise in adjusted earnings, reaching $1.3 billion or $1.83 per share. Adjusted premium fees and other revenues totaled $12 billion, marking a 4% growth compared to the same quarter the previous year.
Piper Sandler revised its outlook on MetLife Inc. (NYSE:MET) shares, lowering the price target to $82 from $85 while maintaining an Overweight rating. This adjustment follows an increase in Group Benefits claims, particularly in dental, a trend observed industry-wide this earnings season. Piper Sandler noted that excluding the impact of these heightened claims, MetLife Inc. (NYSE:MET)’s earnings were consistent with projections.
Hedge fund sentiment towards MetLife Inc. (NYSE:MET) appears positive, with 36 funds holding significant stakes in the company as of Q1 2024. The hedge fund with the largest position in MET is Richard S. Pzena’s Pzena Investment Management.
9. Chubb Limited (NYSE:CB)
Number of Hedge Fund Holders: 53
Chubb Limited (NYSE:CB) is a global insurance corporation offering a wide range of insurance and reinsurance products to individuals, businesses, and other entities worldwide. In the first quarter, the company reported robust financial results, surpassing analyst expectations with earnings per share of $5.41, which was $0.10 higher than the consensus estimate of $5.31. Chubb’s revenue reached $12.22 billion, exceeding the analyst forecast of $11.75 billion. Despite the positive results, the stock traded flat after-hours.
The insurer also reported a 13.3% increase in net income to $2.14 billion and a 20.3% rise in core operating income to $2.22 billion. These improvements were partially influenced by two one-time items: a $55 million deferred tax benefit related to Bermuda tax law and a $30 million contribution to the Chubb Charitable Foundation.
Additionally, Warren Buffett’s Berkshire Hathaway revealed a significant investment in Chubb Limited (NYSE:CB). The conglomerate purchased nearly 26 million shares of the Zurich-based insurer, a stake worth $6.7 billion, making it Berkshire’s ninth-largest holding as of the end of March. Following the news of Berkshire’s investment, shares of Chubb Limited (NYSE:CB) jumped nearly 7% in extended trading. The stock has gained approximately 16.5% year to date.
Out of the 919 hedge funds tracked by Insider Monkey, 53 reported owning stock in Chubb Limited (NYSE:CB) as of Q1 2024. Millennium Management was among the leading hedge fund investors in the company, with a stake worth over $54.9 million
8. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 54
CVS Health Corporation (NYSE:CVS) is a U.S.-based healthcare enterprise that manages an extensive network of retail pharmacies and clinics across the country. The corporation oversees various brands, including CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager; and Aetna, a health insurance provider.
In early May, Argus revised its stock price target for CVS Health Corporation (NYSE:CVS), lowering it to $80 from the previous $100 while maintaining a Buy rating. This adjustment followed CVS Health’s first-quarter earnings for 2024, which fell short of market expectations and led the company to revise its guidance downward. The new earnings per share forecast for 2024 is set at “at least $7.00,” down from the “at least $8.30” projected in February and the “at least $8.50” anticipated during the Investor Day in December.
The company experienced higher-than-anticipated usage in the Medicare Advantage plans offered through its Health Care Benefits segment. As a result, CVS now projects its adjusted operating income for 2024 to be at least $14.75 billion, down from the $16.9 billion estimate provided in February and the initial $17.24 billion outlook from December.
Additionally, on May 23, CVS Health Corporation (NYSE:CVS) saw its shares decline by as much as 3% following an unconfirmed report that the company was seeking a private equity (PE) partnership to expand its Oak Street Health platform. According to the report, CVS Health Corporation (NYSE:CVS) may pursue a partnership similar to Humana’s with Welsh Carson, where CVS would initially take a minority interest in new clinics with an option to purchase once they are established. Analysts and RBC Capital Markets, however, believe that Oak Street clinics will reach break-even by year three or four and mature with $6-7 million in clinic-level profit by year six, protecting CVS from startup losses during the clinics’ early years.
Ariel Global Fund stated the following regarding CVS Health Corporation (NYSE:CVS) in its first quarter 2024 investor letter:
“We bought American healthcare company, CVS Health Corporation (NYSE:CVS), following recent concerns related to potential new laws affecting Pharmacy Benefit Managers (PBMs)—intermediaries that negotiate drug prices between insurers and pharmacies—and issues with pricing in its Medicare Advantage plans, a type of health insurance for senior citizens. Shares presented an attractive entry point after the company lowered its 2024 outlook. While investor apprehension regarding the new laws appears to have eased, utilization of Medicare Advantage plans is also stabilizing. Our purchase of CVS reflects our efforts to capitalize on temporary setbacks and secure positions in companies poised for a rebound.”
7. Centene Corporation (NYSE:CNC)
Number of Hedge Fund Holders: 56
Centene Corporation (NYSE:CNC), based in St. Louis, Missouri, is a publicly traded managed care firm that acts as an intermediary for both government-sponsored and privately insured healthcare programs. The company primarily focuses on the Medicaid market, with a significant portion of its membership coming from programs like the Children’s Health Insurance Program (CHIP) and Temporary Assistance for Needy Families (TANF).
Centene Corporation (NYSE:CNC) reported first-quarter profits of $1.1 billion, driven by an increase in membership and premium revenue, thanks to a significant rise in Obamacare enrollment. The company’s net income exceeded Wall Street analysts’ expectations, reaching $1.16 billion, or $2.16 per share, compared to $1.13 billion, or $2.04 per share, in the same quarter last year, while total revenue increased to $40.4 billion from $38.9 billion year-over-year.
Centene Corporation (NYSE:CNC) also raised its 2024 diluted earnings per share guidance floor to more than $5.94 and its adjusted diluted EPS guidance floor to more than $6.80. The growth in the commercial marketplace, particularly Obamacare, contributed to a 4% increase in “premium and service revenues,” which rose to $36.3 billion from $35.0 billion in the first quarter of 2023.
Among the largest hedge fund shareholders of Centene Corporation (NYSE:CNC) is Harris Associates, holding shares valued at $1.33 billion.
Oakmark Global Fund stated the following regarding Centene Corporation (NYSE:CNC) in its first quarter 2024 investor letter:
“Centene Corporation (NYSE:CNC) is a large health insurer specializing in three major government-sponsored programs: Medicaid, Marketplace and Medicare Advantage. Each of these programs benefits from long-term secular tailwinds. In Medicaid, states are steadily outsourcing their programs to managed care companies like Centene to help reduce costs and improve care quality. Managed Medicaid penetration has increased meaningfully over the past two decades, and we expect further gains over time. In Marketplace, growth is driven by the trend toward more individuals buying health insurance. Centene holds the top market share in both of these programs and is well-positioned to capitalize on their continued growth. Finally, in Centene’s Medicare Advantage business, past missteps will result in losses next year, but we believe Centene can turn its Medicare Advantage segment around and generate positive earnings in the next few years. Centene currently trades for about 9x our estimate of normal earnings power, which we believe is a compelling value for a business that generates healthy returns on capital and is capable of growing EPS at a low double-digit rate.”
6. The Cigna Group (NYSE:CI)
Number of Hedge Fund Holders: 61
The Cigna Group (NYSE:CI) and its subsidiaries specialize in offering insurance and related products and services in the United States. The company also provides pharmacy benefits, home delivery pharmacy, and specialty pharmacy distribution services.
The Cigna Group (NYSE:CI) reported a notable first-quarter, with sales of $57.26 billion, a 23% year-over-year increase, surpassing the consensus estimate of $55.47 billion. This growth was primarily driven by substantial gains in Evernorth Health Services, reflecting multiple large client acquisitions. Adjusted income from operations rose 16% to $1.88 billion, with strong contributions from both Cigna Healthcare and Evernorth Health Services. Cigna Healthcare sales increased 4% year-over-year to $13.3 billion, reflecting premium rate adjustments.
Following The Cigna Group (NYSE:CI)’s strong first-quarter financial results, RBC Capital Markets slightly raised its price target for CI shares to $384 from $383, while maintaining an Outperform rating. RBC’s assessment was also influenced by Cigna’s recent investor day, during which the company raised its long-term growth targets to a range of 10-14%, a projection RBC believes is justified based on The Cigna Group (NYSE:CI)’s current performance and trajectory.
Hedge fund sentiment towards The Cigna Group (NYSE:CI) appears positive, with 61 funds holding significant stakes in the company as of Q1 2024. The largest position is held by Glenview Capital, which owns 1.47 million shares valued at $534.3 million.
Here is what Davis New York Venture Fund has to say about The Cigna Group (NYSE:CI) in its Q3 2023 investor letter:
“In the attractive healthcare sector, we look beyond the obvious to identify businesses that simultaneously have exposure to this growth industry and also trade at low prices. We’re especially drawn to companies like Cigna Group, whose products or services play a part in helping to mitigate healthcare’s constantly rising costs. The healthcare industry has been a growing part of the U.S. economy for decades. As a result, many companies in this sector trade at high valuations reflecting their robust but well-known reputation for growth. For value-conscious investors like us, investing in healthcare requires looking beyond the obvious to identify businesses that have exposure to this growth industry but which trade at low prices. Furthermore, recognizing that the constantly rising cost of healthcare cannot go on forever, we have been particularly drawn to companies whose products or services play some role in managing or reducing the cost of care. As a result, we have positions in Cigna Group, a well-regarded provider of managed care.
5. HCA Healthcare, Inc. (NYSE:HCA)
Number of Hedge Fund Holders: 72
Founded in 1968, HCA Healthcare, Inc. (NYSE:HCA) is a leading healthcare provider known for its extensive network, owning and operating 182 hospitals and approximately 2,300 ambulatory care sites. These sites include surgery centers, free-standing emergency rooms, urgent care centers, and physician clinics.
HCA Healthcare, Inc. (NYSE:HCA) had a notable first quarter in 2024, showcasing strong financial results and significant growth in inpatient admissions, surgeries, and emergency room visits. Although there was a decline in outpatient surgery revenue, the company’s adjusted earnings per share increased to $5.36, reflecting nearly a 9% rise. Adjusted EBITDA climbed to $3.35 billion, a 5.7% year-over-year increase.
Following these developments, TD Cowen revised its financial projections for HCA, lowering the price target to $360 from the previous $371 while maintaining a Buy rating. This revision, which considers the first-quarter performance and a perceived softening in the trend environment, led TD Cowen to adjust its projections for HCA Healthcare, Inc. (NYSE:HCA)’s EBITDA in 2024 and 2025, as well as its 2025 enterprise value to EBITDA minus net corporate income target multiple.
As of Q1 2024, 72 hedge funds held positions in HCA Healthcare, Inc. (NYSE:HCA) The fund with the largest stake was First Eagle Investment Management, holding 4.5 million shares, which comprised 3.41% of their portfolio.
Diamond Hill Large Cap Strategy stated the following regarding HCA Healthcare, Inc. (NYSE:HCA) in its first quarter 2024 investor letter:
“Among our top individual contributors in Q1 were American International Group (AIG) and HCA Healthcare, Inc. (NYSE:HCA). Health care facilities operator HCA Healthcare benefited from a strong demand environment for hospitals in Q4, which is expected to continue into 2024 as nursing labor costs normalize and companies are able to improve margins tied to above-average physician costs. As a best-in-class operator with unique assets in favorable geographies, we believe the outlook for HCA Healthcare from here is favorable.”
4. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 74
Humana Inc. (NYSE:HUM) is dedicated to enhancing health and well-being by providing healthcare benefits to its medical and specialty members. Its extensive range of services includes fully-insured medical and specialty health insurance benefits such as vision, dental, and supplemental health benefits, along with administrative services only (ASO) products for individuals and employer groups. Additionally, the company offers healthcare services tailored to retired and active duty military personnel and their dependents.
Cantor Fitzgerald recently adjusted its price target for Humana Inc. (NYSE:HUM) to $360 from the previous target of $391 set in April, while maintaining a Neutral rating on the stock. This revision follows Humana’s first-quarter earnings report, which surpassed expected financial metrics. Humana reported an EPS of $7.23 for Q1 2024, exceeding the FactSet consensus of $6.12. The company’s revenue reached $29.6 billion, surpassing the expected $28.5 billion. Humana Inc. (NYSE:HUM)’s medical loss ratio (MLR), a critical measure of the amount spent on medical claims relative to the insurance premiums collected, was 89.3%, slightly higher than the consensus of 88.9%.
Despite these positive results, there are concerns about the lack of clarity regarding the company’s outlook for 2025 and the degree of conservatism in its reserve assumptions. Cantor Fitzgerald analysts pointed out that although Humana Inc. (NYSE:HUM) has maintained its full-year MLR at 90% and its EPS forecast at approximately $16, there remains some uncertainty about the new guidance for 2025.
According to Insider Monkey, 30 out of the 919 hedge funds tracked reported owning stock in Humana Inc. (NYSE:HUM) as of Q1 2024. Among the top hedge fund investors in the company, Citadel Asset Management held a notable stake valued at over $372.4 million.
Diamond Hill Large Cap Strategy stated the following regarding Humana Inc. (NYSE:HUM) in its first quarter 2024 investor letter:
“Among our bottom Q1 contributors were real estate investment trusts (REITs) Extra Space Storage and SBA Communications, as well as Humana Inc. (NYSE:HUM. Shares of health insurance company Humana were meaningfully pressured in late 2023 against a backdrop of accelerating medical costs among its Medicare population, weighing on health plan profitability. Further, since Medicare Advantage plan pricing is set in June of each year for the following year, Humana is unable to offset increased medical costs with higher pricing — which in turn pressured shares in Q1. Nevertheless, we anticipate Humana will be able to improve margins over the next several years and maintain our conviction in our position.”
3. Elevance Health, Inc. (NYSE:ELV)
Number of Hedge Fund Holders: 79
Formerly known as Anthem, Inc., Elevance Health, Inc. (NYSE:ELV) is a health benefits company operating in the United States through its subsidiaries. The company manages Blue Cross and Blue Shield plans in 14 states and holds licenses to sell health insurance nationwide. Elevance offers a variety of health plans, including employer-sponsored and individual plans, Medicare Advantage, Medicare supplements, and Medicaid.
Earlier this April, Mizuho Securities revised its financial outlook for Elevance Health, Inc. (NYSE:ELV), raising the stock’s price target to $585 from the previous $575 while maintaining a Buy rating. This decision followed an analysis of Elevance Health, Inc. (NYSE:ELV)’s adjusted earnings per share estimates for the upcoming years. Mizuho increased its adjusted EPS estimates for Elevance Health, Inc. (NYSE:ELV) to $37.30 for 2024 and $41.60 for 2025, up by $0.10. However, the firm’s 2026 EPS forecast remained unchanged at $46.35, indicating an 11% year-over-year growth. Additionally, Mizuho’s Medical Loss Ratio (MLR) estimate for Elevance Health, Inc. (NYSE:ELV) stood at 87.0% for 2024, supported by a first-quarter MLR of 85.6%, which met expectations. Elevance Health, Inc. (NYSE:ELV)’s recent collaboration with the private equity firm Clayton, Dubilier & Rice (CD&R) also aims to expand its primary care services, a move Mizuho views positively as it complements the health benefits company’s existing value-based and primary care offerings.
At the end of the March quarter of this year, 79 hedge funds in Insider Monkey’s database reported having stakes in Elevance Health, Inc. (NYSE:ELV), down from 83 in the preceding quarter. Their collective stake value is over $5.73 billion.
2. The Progressive Corporation (NYSE:PGR)
Number of Hedge Fund Holders: 85
The Progressive Corporation (NYSE:PGR) is a leading American insurance company, offering automobile and health insurance solutions. By the end of 2022, Progressive had become the largest motor insurance carrier in the United States. The company was founded in 1937 by Jack Green and Joseph M. Lewis.
BMO Capital Markets has reaffirmed its positive outlook on The Progressive Corporation (NYSE:PGR), maintaining an Outperform rating with a price target of $235.00. The firm highlighted an unexpected increase in Progressive’s Personal Auto organic policy count growth in May, which contrasts with the typical seasonal slowdown as summer approaches. This growth has led BMO Capital Markets to raise its forward earnings per share estimates for The Progressive Corporation (NYSE:PGR), despite a miss on May EPS due to high catastrophe losses.
As of the end of the first quarter of 2024, 85 hedge funds tracked by Insider Monkey had stakes in The Progressive Corporation (NYSE:PGR). The biggest stakeholder of The Progressive Corporation (NYSE:PGR) during this period was Andreas Halvorsen’s Viking Global which owns a $627.2 million stake in the company.
Artisan Select Equity Fund stated the following regarding The Progressive Corporation (NYSE:PGR) in its first quarter 2024 investor letter:
“The Progressive Corporation (NYSE:PGR) shares rose 30% during the quarter. After a difficult start to 2023, the company quickly adapted and finished the year with impressive growth in premiums and underwriting profits. In Q4 2023, it managed to grow its customer base even as it raised rates and improved its underwriting ratios—a trifecta that isn’t often seen in the insurance industry. This performance has continued, which should set the stage for another year of good results in 2024. Perhaps most importantly, it has been able to navigate the environment far better than its peers, many of whom are still reporting sub-par underwriting performance. Progressive has consistently gained market share in the personal auto market over our ownership period and now commands close to 15% of the total market. Its shares are no longer a bargain, but we continue to hold them due to the high quality of this business and the advantaged nature of its low-cost insurance franchise.”
1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 104
UnitedHealth Group Incorporated (NYSE:UNH), headquartered in Minnetonka, Minnesota, is a leading American multinational corporation specializing in managed healthcare and insurance services. It operates as a for-profit entity and is divided into four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx.
Financial institutions are keeping a close eye on UnitedHealth Group Incorporated (NYSE:UNH)’s performance, with analysts predicting continued growth and profitability. Notably, Piper Sandler recently maintained an Overweight rating on UNH shares, highlighting a positive outlook for the company’s expansion in the Medicare Advantage sector.
In Q1 2024, Insider Monkey’s research revealed that 104 hedge funds held stakes in UnitedHealth Group Incorporated (NYSE:UNH). The largest stakeholder was Ken Fisher’s Fisher Asset Management, with a $1.4 billion investment.
Despite its strong performance, UnitedHealth Group Incorporated (NYSE:UNH) has faced challenges, including a cyberattack on its technology unit that exploited a vulnerability in Citrix software. Additionally, UnitedHealth Group Incorporated (NYSE:UNH) recently reported issues with Medicaid enrollment, which has caused disruptions in reimbursement rates and led to an overall decline in health insurer stocks.
Baron Funds stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its first quarter 2024 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading health insurance company that operates across four segments: United Healthcare, Optum Health, OptumInsight, and OptumRX. Shares fell alongside other managed care organizations (MCOs) due to patient utilization of Medicare Advantage (MA) that was higher than consensus forecasts, raising concerns that MCOs had mispriced 2024 bids and could suffer margin compression as a result. In addition, the industry is facing headwinds from MA reimbursement cuts and Star Rating changes. While management said higher cost trends are mostly transitory and reflected in its bidding, and 2024 guidance was roughly in line with consensus, investors took a more cautious wait-and-see approach. We believe UnitedHealth should remain a core portfolio holding, as it is a way to play positive demographic, population health, and value-based reimbursement trends. Despite its size, we think the company should be able to grow earnings consistent with its 13% to 16% long-term EPS annual target, the fastest among major MCOs.”
While we acknowledge the potential of UnitedHealth Group Incorporated (NYSE:UNH) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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