With 6.5 million people already signed up for health insurance through the federal exchanges, and more than a month still to go in the current enrollment period, Industry Focus sorts through insurance stocks to determine which companies could be the biggest winners in 2015.

Companies on the Medicaid side may not be expecting to see quite such substantial growth, but there are still nearly 10 million more people in the Medicaid system since the introduction of Obamacare, with more to come. Motley Fool analysts Michael Douglass and Todd Campbell break down what investors should look for when seeking exposure to the Medicaid side of the health insurance market.

A full transcript follows the video.

Michael Douglass: The investment takeaway from Obamacare enrollment; this is Industry Focus.


Hi Fools, health care analyst Michael Douglass here with our health care contributor, Todd Campbell. Todd, first off I have not gotten the chance to wish you this, by video at least, but happy 2015.

Todd Campbell: Thank you very much! Hope you have a great new year as well.

Douglass: Yes, it's been good so far. A little snowy here in Virginia. Had a little bit of a snowstorm come through, so the walk to work was a little colder than usual, but that's just how it goes.

Let's jump right in. Obamacare is the topic of the day, and we have a lot to talk about. First off, let's go over the numbers, as they stand right now, in terms of enrollment. Of course enrollment started, I want to say November 15, and ends on February 15. Where do we stand right now, Todd?

Campbell: It's definitely a shorter window for signing up, so it's going to be very interesting to see how this all shakes out. It runs from November 15 to February 15, where last year it started a month earlier than that and ended a month later.

So far, we're at 6.5 million people signing up for insurance through the federally run exchange. That's a huge number; 6.5 million people, with still another... you figure more people will sign up as of January 15, because that's the cutoff for February, and more people will sign up by February 15, obviously because they have to!

So far, so good.

Douglass: Yes. Particularly when you look at Obamacare enrollment last year, we saw at the very end there was this massive push. You had a million people signing up in a very short period of time at the end, so we would expect to see similar-ish behavior this time around.

Of course, a lot of that's going to have to do, I expect, with the fact that there are new -- or expanded -- tax penalties for not taking Obamacare.

Campbell: Yes. The penalties still aren't huge but they should be enough of a stick, if you will, to encourage some more people to sign up. People like to get something for their money, so I think when push comes to shove they look at it, they say, "Well, I can get insurance, or I can pay the penalty. If I get insurance, at least if something bad happens I have some protection."

It'll be interesting to see how this breaks out the next few weeks, but at 6.5 million now, it would certainly seem to me to signal an all-clear for owning health insurance stocks in 2015.

Douglass: Yes, so let's talk about the stocks. Of course, health insurers generally were mostly guiding for not doing terribly well when the exchanges first opened.

What they were basically saying is, "Well, it's hard to price for these people" -- and it is. A lot of these people hadn't had insurance before, or hadn't had insurance in a long time. They didn't know what the risk pools looked like, and of course the government created a number of programs like the risk corridors to help those insurers get close to breaking even at least, if things didn't go their way.

But things definitely did seem to go their way during 2013 and 2014. We saw particularly WellPoint, now Anthem (NYSE:ANTM), do really actually pretty darn well off the exchanges. What are we thinking about for this group?

Campbell: Anthem's a great story because they came into 2014 guiding the street to expect about $8.00 at the low end on earnings, and I think now as of the last estimate they're telling people to expect at least $8.80 a share when all is said and done for 2014.

UnitedHealthcare (NYSE:UNH), that's another one that came into the year saying, "You know what? We really don't expect to see any earnings growth at all." But they're kind of an odd duck because they decided to take a very, very limited approach to participating in the exchanges for 2014 in that first open enrollment. They only did about four states, so it really didn't move the needle at all for them.

You look at that and you say, "OK, what does that mean for 2015?" Well, if these guys use that experience from 2014 to price these products better, then these could become very profitable products for these companies over the course of 2015, especially given how many people are signing up.

If so, that's going to translate into some pretty significant bottom line growth as well. I think that they're looking at Anthem delivering 6% earnings growth in 2015 versus the 2014 estimates, and UnitedHealthcare is expected to grow their earnings more than 9% in '15 versus '14, primarily because since they hadn't participated in many exchanges last year they didn't get the benefit, but this year they're participating in almost 24 states, I think.

Douglass: Yes, definitely a substantial potential tailwind for UnitedHealth Group.

Although, I think we shouldn't undersell what a tailwind this could be for Anthem, because now Anthem's been in the exchanges for a year. They presumably know how to price. They've talked previously about the fact that the Blue Cross Blue Shield brand has been really powerful for them in these exchanges, so I could see them still picking up a fair bit of this exchange enrollment, and also knowing very well how to price for it.

It was really funny, last year they kept talking about, "This kind of beat our expectations," so they had to staff up to meet that expanded enrollment, which is really a great problem to have, when you think about it.

Campbell: Yes. You really saw that happen, too, in the Medicaid insurers as well in this past year. A lot of investment had to be made in the administration side of things to handle this huge influx of new people that were coming onto Medicaid as part of reform as well.

Yes, now that all that investment has been done, there's a tremendous opportunity for leverage. It'll be very interesting once we get into the Q4 earnings season, as they're reporting those earnings, to listen to what those CEOs have to say.

Pay attention. I think there are going to be some interesting things coming out, and that we'll get more insight into whether or not they think that these exchange products will be profitable for them this year. We'll also get, probably, some guidance on how many millions of people they expect that they'll sign up this year.

Then on the Medicaid side, that will be interesting too because we should get some more insight into how much that could move the needle for these companies as well.

Douglass: Sure. When we're thinking, then, about our investment takeaway. Of course the big question -- this is an investment podcast, people are going to want to know -- what are the best companies to invest in here?

For me, I'm going to pitch Anthem. When I think about the fact that they're not a pure play -- they've been really strongly into the exchanges, they've also done a lot with Medicaid and with their government side business -- so I think it's a nice hybrid play where you get the opportunity of both sides, with the greater upside potential on the exchange side, with the Medicaid growing not as substantially.

Campbell: Almost like a kicker.

Douglass: Exactly. Not growing as substantially this next year, probably, in comparison to the exchange opportunity.

How about you? Which stocks are you watching most closely?

Campbell: Well, I'm not going to disagree with you on Anthem. I like Anthem a lot. I think that could be a stock that continues to go up.

I think a bigger surprise could be UnitedHealth because I think more investors maybe stayed on the sideline on them this year, and the comparisons are going to be easier. I think the comparisons will be a little bit tougher on Anthem only because, again, 14 states last year, 14 states this year, so it's just going to be whatever incremental increase they can get.

Whereas, with United you're going from just a handful of states to more than 20, so I think it could move the needle a little bit more for them, and that's probably what's reflected in the analysts' expectations for growth being higher at United than it is for Anthem.

On the Medicaid side of things, if you want to go up the risk spectrum a little bit, for people who want the broad exposure, sure, go with Anthem, go with United.

If you want more specific exposure to the Medicaid, think about that. Medicaid has signed up 9.7 million more people since prior to open enrollment in 2013. That's a ton of people, and that's moving the needle, big time, for these companies.

Centene (NYSE:CNC) was a top performer last year. It's most likely going to be a top performer again this year, based on the fact that analysts think its earnings are going to grow more than 16%. Then you could go and say, "OK, Centene had made a big move. What are some others in that space?" Going even further out on the risk curve, maybe you take a look at Molina (NYSE:MOH) or Health Net (UNKNOWN:HNT.DL).

Douglass: Right. Of course, the thing with the Medicaid piece is that there is additional potential upside, both from people who haven't signed up within states that expanded Medicaid, and then of course for states that -- and it's been happening one by one -- states have been agreeing to go ahead and expand Medicaid.

You had Michigan do it, you had Pennsylvania do it. You had Tennessee now using a private option, so there are definitely some opportunities for upside with some of these Medicaid companies. But you have to remember to really check and see which companies have contracts with which states, and which parts of which states -- where are they strong?

Campbell: Yes, that's a great point and it's a great reminder for investors that the SEC filings that these companies put out every quarter are a great resource. You can go in there and they will actually give you a breakdown of exactly how many members per state each one of these Medicaid players has.

You can see what states does this one participate in, you can see how much of their business they get from that state, so yes, they should definitely be looking at these and doing some due diligence on them.

That being said though, Michael, we also have to remember that there's kind of a follow-on effect, or a halo effect, that's coming from reform. Enrollment in Medicaid actually picked up, even in states that didn't expand.

Douglass: Right.

Campbell: Now granted, it was only growing ... maybe in those states it's more like 4-5% growth rather than high single digits. But Kaiser Family Foundation, which tracks all of this stuff, they think that you could still see double digit Medicaid growth from enrollment for the 2015 cycle as well.

Douglass: Yes. The so-called "woodwork effect" has been measured and has been definitely there in non-reform states, so that's a good point. An additional kicker, perhaps, that the market may have trouble pricing in appropriately for these stocks, so definitely something to keep an eye on here.

Todd, final question for you. HHS was estimating, what, 9 million I think, for this enrollment cycle? We're at 6.5 right now. Do you think Obamacare beats it this time?

Campbell: We're going to beat it.

Douglass: Yes?

Campbell: Yes. I feel pretty confident that we're going to beat it. I think there will be enough of a push in the course of the next six or eight weeks that I would not be shocked if we got up closer to 10 million. Yes, I think we'll beat it.

Douglass: All right, definitely something to keep an eye on. Todd, as always, thank you for our lovely conversation. Folks, check back to Fool.com, and of course the Industry Focus podcast, for all of your investing -- health care and otherwise -- needs, and Fool on!