Justin Lake (formerly of UBS and now of J.P. Morgan) says he has a “modestly constructive” outlook on health plans. Not exactly a ringing endorsement, but given all the uncertainty, an understandable one. Lake has initiated coverage of the sector with buy ratings on Amerigroup, Centene, Cigna and UnitedHealth. He has hold ratings on Aetna, Coventry, Health Net, Humana, Molina and Humana. He has no sell ratings.
Concerns on cost trend acceleration will prove unfounded with our not for profit industry conversations and hospital/physician data indicating no pickup. While the Supreme Court decision adds uncertainty, we think it is outweighed by potential positive…November elections as well as government driven growth opportunities….That said, we see little upside to Q2 numbers while earnings visibility moderates as cost trend flattens.