By snapping up competitor Coventry Health Care, Aetna became the latest insurer to consolidate costs — and coverage — in response to the nation’s health care reform. It’s a trend experts say will likely accelerate in coming months, and one that could have far-reaching impact on consumers and investors.
Announced Monday, the Aetna deal is the third acquisition by a large insurer over the past year: WellPoint said in July that it would buy Amerigroup, and last October, Cigna agreed to buy HealthSpring. But analysts and investors say this is only the first wave. “I think it will be more of a trend going forward,” Lou Stanasolovich, president of Legend Financial Advisors in Pittsburgh, says of the acquisitions. “It changes the playing ground a little bit.”
For large insurers, the mergers are a way to grow membership and lower costs — which could be a boon for investors. For consumers, there will likely be fewer health care providers to choose from, but experts say that isn’t necessarily a bad thing. Here is a look at how consolidation of the health insurance industry could impact you.
The asking price is the starting point for all home sales, a ballpark figure typically close to what buyers end up paying. But the nation’s real estate market is so out of whack, experts say, that in many cities the gap between the asking and purchase prices has grown enormous. In fact, while home sales are on the decline nationally, list prices keep rising.
Hedge funds are scooping up shares of the bankrupt brokerage MF Global Holdings Ltd. in hopes of profiting if the company’s assets are worth more than expected. Investment pros say individuals can do the same — but should they?
Since declaring bankruptcy last month, following reports the brokerage couldn’t locate more than $600 million in customer funds, MF Global’s fortunes have plummeted. But that hasn’t stopped hedge funds such as Centerbridge Partners and Apaloosa Management from snatching up tens of millions of dollars in stock, the Wall Street Journal reports. The company is now a penny stock, meaning it’s no longer eligible for the major exchanges. Shares currently trade at about 14 cents on the over-the-counter bulletin board exchange.
For investors, yesterday brought a double dose of good cheer: Not only did the Dow finish up 330 points, but the Chicago Board Options Exchange Market Volatility Index — more commonly known as the VIX or the “fear index” — fell more than 8%. Does that mean the worst of the market turbulence is over?
Not quite. To get a clear picture of where the stock market sees volatility headed, investors should compare the VIX, which measure investor anxiety, to its futures, says Timothy Strauts, an exchange-traded fund analysts for researcher Morningstar Inc. The “spot VIX” — the number that’s quoted in the news – is based on the current prices for options on the Standard & Poor’s 500-stock index; the cost of options rises as the stock market becomes more volatile. In other words, it’s best to think of the VIX as a snapshot of what’s happening in the here and now, Strauts says.
On the other hand, VIX futures allow traders to bet on where they believe the index will be in a month or several months from now. Comparing the current spot VIX to VIX futures, says Strauts, shows whether traders expect stocks to be more or less volatile a month from now than they are today.
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