Increasingly, national insurers like WellPoint (NYSE:ANTM) and Aetna (NYSE:AET) are relying on diversification to help generate new revenue and greater profitability. The public exchanges created by the Affordable Care Act, more commonly known as Obamacare, are a perfect example of an area where both insurers have the potential to grow membership organically.
Both insurers also made big acquisitions last year to increase their exposure to Medicare and Medicaid managed care. WellPoint bought Amerigroup, for $4.5 billion, while Aetna purchased Coventry Health, for $7.3 billion. This diversification has grown revenue at both insurers, but it also leaves their business models exposed to more factors outside their control.
In the video below, health care analysts Michael Douglass and Max Macaluso discuss the three largest outside factors that every investor in the insurance industry should know.