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 CVS Health Corporation (NYSE:CVS) 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 row of shelves in a retail pharmacy, demonstrating the variety of drugs and over-the-counter products.
CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 63
CVS Health Corporation (NYSE:CVS) is an American healthcare company that provides health insurance products and services through Aetna. The company also owns many other brands, including CVS Pharmacy, a retail pharmacy chain. Aetna offers a wide range of health plan options, including commercial coverage plans, Affordable Care Act (ACA) plans, Medicaid plans, Medicare plans, and vision and dental plans. It serves employer groups, individuals, and families. CVS Health Corporation (NYSE:CVS) ranks among the best health insurance stocks to buy in 2025 according to hedge funds.
The company is focused on expanding its healthcare offerings and driving innovation for Aetna’s self-insured customers. CVS Health Corporation (NYSE:CVS) recently introduced Simple Pay for its commercial customers. This differentiated offering provides greater price certainty before a visit or treatment. This makes quality healthcare simpler and more affordable for both members and employers. Additionally, in December 2024, CVS Health Corporation (NYSE:CVS) reported that Aetna is expanding the functionality of its health app to include Spanish language capabilities for all eligible health plan members. This will allow Aetna to better serve diverse populations.
The company finalized an enterprise-wide restructuring plan in the third quarter of 2024 to streamline and simplify the organization, enhance efficiency and lower costs. CVS Health Corporation (NYSE:CVS) is closing some of its retail pharmacy stores and optimizing its corporate workforce optimization. The company expects to close about 270 stores in 2025. CVS Health Corporation (NYSE:CVS) is also discontinuing certain non-core assets as it prioritizes long-term growth.
Overall, CVS ranks 5th 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 CVS 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.