Raymond James Updates Healthcare Top Picks for October

Vice President JD Vance announced 760,000 ACA enrollees were dropped due to fraud, with 400,000 under review. Insurers like Centene, Molina, Elevance, and UnitedHealth saw stock declines. Experts warn of squeezed margins in 2026-2027 due to a less healthy risk pool. Premium rates for 2027 are locked, and insurers may push for higher 2028 rates. Brokers, who drive 75% of sign-ups, face new restrictions and potential reputational damage.

UnitedHealthcare will discontinue some Medicare Advantage plans in 2027, notifying affected members in October. Members can switch plans or revert to original Medicare. The move follows financial pressures, including rising healthcare costs and government payment reductions, despite a 2.48% payment rate increase for 2027.

A crackdown on Obamacare by the Trump administration may raise costs for US consumers and insurers. 760,000 enrollees were removed for suspected fraud, with 400,000 under review. This could impact insurers like UnitedHealth and Centene, as a sicker mix of patients may reduce profits. Shares of health insurers fell following the announcement.

A Minnesota federal court dismissed most of a securities fraud case against UnitedHealth Group, ruling that claims about misled shareholders regarding its Medicare Advantage business were invalid. The case alleged a multi-billion dollar scheme to maximize revenues. Judge Sparkle Sooknanan expressed reservations but did not reject the settlement. UnitedHealth Group is a publicly traded company (UNH).

UnitedHealth must face a shareholder lawsuit by CalPERS over alleged misleading statements about financial transactions that added $3.3B to 2024 earnings, per a federal judge. The lawsuit can proceed on limited claims, but broader allegations were dismissed. UnitedHealth shares fell 2.1%. The company denies wrongdoing and plans to defend itself.

A federal judge allowed a lawsuit against UnitedHealth Group to proceed, rejecting the company's motion to dismiss claims it inflated 2024 earnings by $3.3 billion to hide Medicare Advantage business weakness. The judge dismissed most allegations by CalPERS that UnitedHealth misled investors to boost its stock price, stating the claims lacked specificity.