Health Net rises as analyst lifts target

NEW YORK — Shares of Health Net Inc. advanced Friday after a Citi Investment Research analyst raised his price target on the stock, citing the revenue Health Net could gain as Medicare and Medicaid patients in California are moved to private insurance providers.

THE SPARK: Analyst Carl McDonald kept a "Buy" rating on the stock and raised his target to $48 per share from $35. He said the company could pick up $2 billion in annual revenue as the state of California switches "dual eligible" Medicare and Medicaid patients to private health insurance. Health Net does business in eight counties in California, and the state has not chosen which counties will have their dual eligibles switched this year.

THE BIG PICTURE: "Dual eligibles" generate a lot of medical claims, and federal and state governments are looking to place them into managed care to improve coverage and cut down on wasteful spending and duplicate tests. California says it has around 1.1 million of those patients, and McDonald said the state has decided that health insurers who already operated health plans in California will be the only ones who can submit bids for those services.

McDonald said Health Net and Molina Healthcare Inc. both stand to gain a lot of patients and revenue. Earlier this week McDonald said Molina could gain $3.8 billion in annual revenue if it maintained its market share in California, Michigan and Ohio during the conversion of dual eligibles.

SHARE ACTION: Health Net shares rose $1.40, or 3.9 percent, to $37.55 in afternoon trading. The stock is up over 64 percent from its closing price on Oct. 3.

Scientific American

• Health Net rises as analyst lifts target