BARCLAYS: These health insurers stand to profit the most from Medicaid expansion after Democrats' big election win

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BARCLAYS: These health insurers stand to profit the most from Medicaid expansion after Democrats' big election win

protest medicaid

Getty Images/Justin Sullivan

Protestors carry signs as they demonstrate against proposed cuts to Medical and Medicare outside San Francisco city hall on September 21, 2011 in San Francisco, California.

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  • Medicaid expansion was a prominent healthcare issue on the ballots this midterm election.
  • Three red states voted yes to expansion, and Barclays analysts think more states will follow suit post-election.
  • Here's how the the expansion will impact managed care organizations.

Last Tuesday, residents in three red states -Idaho, Nebraska, and Utah - voted to expand their state Medicaid program to more low-income people. This adds them to the roster of 34 other states and Washington, D.C. who've taken similar actions under the Affordable Care Act.

At least three other states may also expand Medicaid: Kansas, Wisconsin, and Maine. That's because these states now have Democratic governors.

That'll be good news for health insurance companies that specialize in Medicaid, according to a Barclays report on Monday from analysts led by Steve Valiquette. Already, the share prices of Centene, Molina Healthcare, and WellCare Health Plans received an average bump of 9% the day after the election.

The actual profits that the health insurance companies stand to earn in those six states are relatively limited. Those states could add about 725,000 people to Medicaid, or $3.2 billion in incremental spending, the Barclays analysts said, citing a study from the Robert Wood Johnson Foundation.

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Expansion in those six states would boost Centene's profit by about 0.5% next year, while adding 1.4% to Molina's earnings and 0.4% at WellCare, according to Barclays.

The bigger opportunity will come if remaining holdout states adopt Medicaid expansion. In total, coverage would expand to over 7 million people, representing nearly $35 billion in incremental spending.

Among these states, the biggest profit opportunities for health insurers would be in Florida, Georgia, and Texas, which together accounts for 50% of the total.

Based on current state market shares and company presence, Barclays estimates that the companies that would benefit most if all the remaining states expanded Medicaid are Centene (10% profit increase), Molina (10%), and WellCare Health Plans (14%).

Analysts think that Anthem would benefit slightly, and it would have very little impact on Cigna, Humana, or UnitedHealth Group.

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