Managed Care Sector Update (CVH, UAM, UNH, HNT, WLP)

Analysts at Goldman Sachs have released an update on the Managed Care sector. Analysts have made changes to their ratings for the companies in managed care. The rating changes have been made to reflect the view that passage of health reform is now more likely than not.

Analysts’ repositioning primarily reflects higher risk to Medicare Advantage fundamentals in the event that legislation passes. Analysts have downgraded Universal American Corporation (NYSE: UAM) from Neutral to Sell rating and upgraded Coventry Health Care, Inc. (NYSE: CVH) from Sell to Neutral rating. Analysts have also removed UnitedHealth Group Inc. (NYSE: UNH) from Americas Conviction Buy list while maintaining their Buy rating for the company.

The price targets for companies in managed care have also been lowered modestly. The price target has been lowered for CIGNA Corporation (NYSE: CI) from $48 to $47, Health Net, Inc. (NYSE: HNT) from $33 to $31, UnitedHealth Group from $43 to $41, Aetna Inc. (NYSE: AET) from $37 to $35, Humana Inc. (NYSE: HUM) from $56 to $51, WellPoint, Inc. (NYSE: WLP) from $79 to $75, and Coventry Health Care from $26 to $25.

Analysts have maintained their Attractive coverage view of managed care, which is primarily driven by their belief that the commercial underwriting down cycle is nearing an end and the headwind from lower enrollment will diminish. Analysts also expect the sector to benefit from the easing of uncertainty around health reform and are comfortable with the outlook for commercial and Medicaid-driven managed care under the Senate version of health reform.