We recently published a list of 12 Best Health Insurance Stocks to Buy in 2025. In this article, we are going to take a look at where Centene Corporation (NYSE:CNC) stands against other best health insurance stocks to buy in 2025.
The health insurance sector in the US is currently experiencing significant shifts. The increasing costs of healthcare services, evolving enrollment trends, and technological advancements are some of the key trends driving change and growth in the sector. According to a report by IMARC Group, the US health insurance market was valued at $453 billion in 2024. The market is expected to grow at a compound annual growth rate (CAGR) of 3.7% during 2025-2033 to reach a value of $639 billion by the end of the forecast period.
READ ALSO: 12 Best Medical Stocks To Buy Under $20 and 10 Best Stocks to Buy and Hold For 2025.
In January 2025, the US government proposed significantly increasing the amount that it pays to insurers who offer Medicare Advantage plans. On January 10, Reuters reported that the government has suggested new reimbursement rates for Medicare Advantage plans for 2026, which are run by private insurers. The rate changes proposed could increase payments to private insurance companies by 2.2%. This is a notable change from the 0.2% decrease last year.
The government payment rate impacts how much private insurance companies charge for monthly premiums, the types of benefits insurers offer, and how much insurers can profit. When factoring in a 2.1% risk score, the total payment increase is estimated at 4.3%, or over $21 billion. The risk score adjustment accounts for the possibility of higher payments for patients with severe health conditions.
Private health insurance companies will use the payment rate to prepare bids for contracts for Medicare Advantage plans that they will offer in 2026. Around 65 million individuals are enrolled in the government’s Medicare program which caters to people aged 65 and older or who are disabled. Over half of these individuals are enrolled in Medicare Advantage plans.
Oppenheimer analyst Michael Wiederhorn wrote in a research note that this proposal is very favorable given the contentious political environment. He believes this proposal should positively affect health insurance stocks involved in this space. However, the proposed rate may be changed after feedback from insurers, other organizations, and the public. The final rate announcement is expected to be published on or before April 7, 2025.
Methodology
To compile our list of the 12 best health insurance stocks to buy in 2025, we looked for the largest health insurance companies. We also reviewed our own rankings, financial media reports, ETFs, and various online resources to compile a list of the best health insurance stocks. Next, we focused on the top 12 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 12 best health insurance stocks to buy in 2025 are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
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).
A doctor holding a clipboard in a hospital ward, discussing patient treatment plan with the nurses.
Centene Corporation (NYSE:CNC)
Number of Hedge Fund Holders: 51
Centene Corporation (NYSE:CNC) is an American insurance company that provides government-sponsored and privately insured healthcare programs. The corporation provides a wide range of managed healthcare products and services, primarily through Medicaid, Medicare, and commercial products. The commercial segment provides health plan plan coverage to individuals and large and small employer groups. Centene Corporation (NYSE:CNC) is one of the best health insurance stocks to buy in 2025.
Oakmark Fund, advised by Harris Associates, discussed Centene Corporation (NYSE:CNC) in its Q4 2024 investor letter and noted that despite the company releasing resilient third-quarter 2024 results in the face of short-term industry pressure, its stock price still declined in Q4 2024. At its investor day in December 2024, Centene Corporation (NYSE:CNC) also gave above-consensus guidance for 2025 earnings per share (EPS). The fund believes that investor concern about how new laws after the US presidential election could affect the company was the main reason for the stock’s decline. Oakmark Fund believes that CNC has a lot of embedded earnings power to drive continued EPS growth, even if the political environment is not so favorable.
Centene Corporation (NYSE:CNC) presents a compelling investment opportunity. In its fourth quarter 2024 investor letter, Oakmark Fund also pointed out that Centene Corporation’s (NYSE:CNC) shares are trading at less than 9 times the 2025 EPS guidance, which is an attractive valuation for a company with strong returns on capital that operates in a growing industry.
Overall, CNC ranks 8th on our list of best health insurance stocks to buy in 2025. While we acknowledge the potential of health insurance companies, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CNC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
