5 HMO Stocks to Watch Amid Steady Premium Flow, Increased Digitization

The U.S. health insurance industry, commonly referred to as the

(HMO), continues to benefit from a diversified membership base, an aging population, digital transformation and strategic mergers and acquisitions (M&A). Growth in Medicare Advantage, particularly Special Needs Plans, and steady commercial and exchange enrollment should support premium flows, partly offsetting expected Medicaid membership declines amid regulatory changes. Meanwhile, insurers are enhancing Medicare offerings and investing in home-based care, telehealth, digital tools, automation and AI to improve care delivery and operating efficiency. Strategic acquisitions should further broaden capabilities, diversify revenues and strengthen integrated healthcare platforms. Industry leaders such as UnitedHealth Group Incorporated

, The Cigna Group

, Humana Inc.

, Centene Corporation

and Molina Healthcare, Inc.

are well-positioned to capitalize on these favorable growth dynamics. 

About the Industry

The Zacks HMO industry consists of entities (either private or public) that take care of subscribers’ basic and supplemental health services. Players in this space primarily assume risks and assign health and medical insurance policy premiums. Industry participants also provide administrative and managed-care services for self-funded insurance. Services are generally offered via a network of approved care providers (called in-network), which include primary care physicians, clinical facilities, hospitals and specialists. However, out-of-network exceptions are made during emergencies or when medically necessary. Health insurance plans can be availed through private purchases, social insurance or social welfare programs.

4 Trends Shaping the Fate of the HMO Industry

Diversified Membership Mix Supports Steady Premium Flow: Membership trends across Medicare, Medicaid and other health plans remain broadly supportive for the U.S. health insurance industry, though the mix is shifting. Special Needs Plans is emerging as an increasingly important growth area within Medicare Advantage. However, expected Medicaid membership declines resulting from growing regulatory challenges following the enactment of the One Big Beautiful Bill Act may act as a partial offset. But to add some relief, commercial employer-sponsored and individual exchange plans continue to diversify insurers' membership bases and ensure an uninterrupted flow of premiums, the most important revenue component for any health insurer.  

An Aging U.S. Population: Medicare plans are specifically designed to meet the healthcare needs of individuals aged 65 and older. The aging U.S. population is steadily expanding the pool of Medicare-eligible individuals and generating higher premium revenues. As older adults generally require greater access to medical services and ongoing management of chronic conditions, insurers are enhancing Medicare Advantage offerings to provide more comprehensive and coordinated coverage. Efforts include strengthening primary and preventive care, expanding care-management programs and offering supplemental benefits covering dental, vision, hearing, wellness and other everyday healthcare needs.  These initiatives can improve care coordination and member experience, thereby paving the way for increased plan enrolment.

Digital Transformation Through Technology Investments: Digital transformation remains underway across the HMO industry as health insurers increasingly invest in technology to improve member engagement, streamline operations and enhance care delivery. Insurers are expanding digital platforms, mobile applications, telehealth capabilities and self-service tools to make healthcare services more accessible and convenient for members. At the same time, greater use of automation, advanced analytics and Artificial Intelligence is helping insurers simplify administrative processes and improve claims management. While these investments may initially increase costs for health insurers, they should gradually enhance operating efficiency and the overall member experience, and generate more sustainable revenue growth over the long term.

Strategic M&A Strengthens Growth Opportunities: M&As continue to offer meaningful growth opportunities for the U.S. health insurance industry as insurers pursue strategic deals to broaden capabilities, strengthen geographic presence and diversify beyond traditional insurance operations. Companies are increasingly targeting assets in care delivery, pharmacy services, specialty benefits, healthcare technology and other complementary businesses that can deepen relationships with members and create additional revenue streams. Such transactions can also help insurers build more integrated healthcare platforms, expand access to services and improve operational efficiency through greater scale and technology sharing. 

Zacks Industry Rank Instills Optimism

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. The Zacks Medical-HMOs industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #25, which places it in the top 10% of 247 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one. 

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.

Before we present a few stocks that you may want to buy or retain in your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms S&P 500, Sector

The Zacks Medical-HMO industry has gained 24% in the past year compared with the Zacks S&P 500 composite’s 21.4% growth. The Zacks Medical sector rallied 15.1% in the same time frame. 

One-Year Price Performance
 

Image Source: Zacks Investment Research

Industry's Current Valuation

Based on the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry trades at 15.77X compared with the S&P 500’s 20.37X and the sector’s 21.96X. 

Over the past five years, the industry has traded as high as 19.64X and as low as 11.58X, with the median being at 16.13X, as the chart below shows.

Forward 12-Month Price/Earnings (P/E) Ratio
 

Image Source: Zacks Investment Research

Image Source: Zacks Investment Research

5 Stocks to Keep a Close Eye On

We present five stocks from the space, either sporting a Zacks Rank #1 (Strong Buy) or #3 (Hold). Considering the current industry scenario, it might be prudent for investors to buy or retain these stocks in their portfolio, as these are well-placed to generate growth in the long haul.

You can see the complete list of today’s Zacks #1 Rank stocks here.

UnitedHealth Group: Minnesota-based UnitedHealth Group benefits from the complementary capabilities of UnitedHealthcare and Optum. UnitedHealthcare benefits from strong local-market relationships, a broad product portfolio and advanced technology. Optum’s capabilities in value-based care, population health and analytics further strengthen the company’s position across the healthcare system. Additionally, continued focus on M&As, coupled with expanding telehealth capabilities, strengthens the nationwide footprint of this Zacks Rank #1 company.

The Zacks Consensus Estimate for UnitedHealth Group’s 2026 earnings is pegged at $19.81 per share, which implies 21.2% growth from the year-ago figure. UNH’s earnings beat estimates in each of the last four quarters, the average surprise being 12.05%.

Price & Consensus: UNH

Image Source: Zacks Investment Research

Centene: Based in Missouri, Centene serves as one of the nation’s leading Medicaid and Marketplace insurers and stand-alone PDP providers. Its businesses are further supported by numerous contract wins and steady membership expansion. Its locally focused model allows it to tailor products, provider networks and services to community needs. Investments in data-driven care and expertise in dual-eligible populations further support care coordination, affordability and member outcomes. This Zacks Rank #1 company also pursues strategic growth through acquisitions and provider partnerships. Management projects premium and service revenues within $173-$177 billion for 2026.

The Zacks Consensus Estimate for Centene’s 2026 earnings is pegged at $4.89 per share, which more than doubled from the year-ago figure. CNC’s earnings outpaced estimates in each of the last four quarters, the average being 151.28%.

Price & Consensus: CNC

Image Source: Zacks Investment Research

Cigna: Based in Connecticut, Cigna is aided by Evernorth Health Services and Cigna Healthcare businesses. Evernorth benefits from its comprehensive portfolio of specialty pharmacy services, while Cigna Healthcare leverages its broad customer base across both the U.S. Government and U.S. Commercial markets. Its extensive customer relationships and broad provider network support significant scale, while a modular portfolio enables solutions to be tailored to client needs. This Zacks Rank #3 company further enhances its market position and growth prospects through strategic acquisitions and partnerships with leading healthcare organizations,

The Zacks Consensus Estimate for Cigna’s 2026 earnings is pegged at $30.50 per share, indicating 2.2% growth from the prior-year figure. CI’s earnings beat estimates in each of the last four quarters, the average surprise being 2.31%.

Price & Consensus: CI

Image Source: Zacks Investment Research

Humana: Headquartered in Kentucky, Humana benefits from its longstanding Medicare expertise, national reach and integrated care delivery model. The company offers a diverse set of health plans across 50 states and leverages a geographically diverse membership base to broaden its provider networks. The strong execution of these programs has enabled the company to win new contracts. Its model combines insurance with CenterWell’s primary care, pharmacy and home health capabilities, supported by data analytics and value-based care arrangements. Additionally, strategic acquisitions have strengthened business diversification efforts and expanded the geographic reach of this Zacks Rank #3 company.

The Zacks Consensus Estimate for Humana’s 2026 earnings is pegged at $9.11 per share. The consensus mark for 2026 earnings has moved 1.1% north over the past 30 days. HUM’s earnings surpassed estimates in each of the last four quarters, the average surprise being 9.59%.

Price & Consensus: HUM

Image Source: Zacks Investment Research

Molina Healthcare: This California-based health insurer benefits from its focused expertise in government-sponsored healthcare, broad presence across 21 states and established scale serving roughly 4.9 million members as of June 30, 2026. The company develops affordable Medicare and Medicaid plans, enriched with extensive benefits, which have consistently led to contract wins and a steady customer base for the Zacks Rank #3 company. Management expects premium revenue to be approximately $42 billion for 2026. The company continues to strengthen its market position through disciplined acquisitions.

The Zacks Consensus Estimate for Molina Healthcare’s 2026 earnings is pegged at $5.29 per share. The consensus mark for MOH’s 2026 earnings has moved 1.1% north over the past 30 days. MOH’s earnings beat estimates in two of the last four quarters and missed the mark twice.

Price & Consensus: MOH

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This article originally published on Zacks Investment Research (zacks.com).

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