Inflation may be rearing its ugly head, but companies can still make money in this environment. They just need pricing power -- the ability to pass their rising costs along to their customers. If customers are willing to pay more for the same product, companies don't have to give up their gross profits.

Health insurers have been hit particularly hard, as medical costs have risen considerably faster than insurers were expecting. One way to tease out whether customers are unwilling -- or more likely unable -- to pay the higher prices is by looking at the changes in memberships.

Going up
At Aetna (NYSE:AET), membership in its medical plans rose slightly less than 4% over the first half of the year. Not stellar, but nothing to complain about, either. Coventry Health Care (NYSE:CVH) was up just 2%.

UnitedHealth Group (NYSE:UNH) has added members to its commercial health plans, but that's mostly because of acquisitions. Organic growth is down about 660,000 members in the first half of the year. Fortunately, most of those were using its risk-based products.

Cigna (NYSE:CI) also saw extrinsic growth in the first half of the year. Membership increased by 19%, mostly because of the 1.8 million members it picked up in the acquisition of Great-West Healthcare; organic growth is expected to come in around 1% this year.

Headed in the wrong direction?
WellPoint (NYSE:WLP) lost 189,000 members in the business and individual plans in the first six months of the year, and it expects to lose an additional 150,000 members by December, thanks to the loss of Connecticut's Medicaid program.

Humana (NYSE:HUM) has seen membership in its Medicare program jump 19% over last year’s first six months, but membership in its prescription drug plan has dropped 10% over that time. As you'll recall, that program started its decline this year.

The big black hole
And then there's WellCare Health Plans (NYSE:WCG). The company hasn't released financial statements since shortly after the government raids on the company's offices last year. Without knowing how its membership numbers -- or earnings for that matter -- are doing, buying WellCare's stock is akin to buying a lottery ticket. You could see a giant gain, but is that any way to invest?

Only half the story
Of course, membership isn't the whole story. To make growing membership numbers meaningful to the bottom line, the companies must raise rates in tandem with the increase in medical costs.

We'll get a better idea of whether that's happening as companies release their third- and fourth-quarter revenue. The number for investors to keep an eye on is the medical care ratio -- the fraction of premiums paid out for care. Think of it as the gross margin of the health-care industry.

There is some evidence that insurers are following through with their pledge to not lower margins just to keep customers around. Last week, Humana said that it's raising the prices of its stand-alone Medicare Part D drug program. The price is above the Centers for Medicare and Medicaid Services benchmark for assigning dual eligible Medicare/Medicaid patients, so Humana won't be getting the 308,000 auto-assigned members that it had this year. Investors were rightly more excited about the potential higher revenue than the loss of members, sending the stock up 4% after the announcement.

Priced for very little growth
Many of the health insurers are priced well below their historical price-to-earnings ratios. Short-sighted investors have essentially priced zero growth into the industry. Sure, it'll take a while to get all the higher medical costs built back into the premiums, but eventually the growth will return.

Investors looking to add some value stocks to their portfolio could be seeing one of the best opportunities in many years.

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