Have you ever considered buying shares in private health insurer NIB Holdings Limited (ASX: NHF)?
Well, now might be the time to add it to your collection, or at very least, your watchlist. The stock is trading 10c or 3.6% higher today at $2.87 a share following suggestions that more Australians could be forced to take out private health insurance.
The Abbott government's National Commission of Audit (COA), which was established to review the performance and roles of the Commonwealth government, has recommended that Australia's high income earners should be excluded from Medicare. This would target individuals earning more than $88,000 a year and a family with earnings in excess of $176,000 a year.
This would be excellent for shareholders in NIB Holdings which could see demand for the company's products soar. In a statement to the market this morning, NIB's Managing Director Mark Fitzgibbon said: "Funding our future health care requires major reform and an expanded role for PHI (private health insurance). While it is very early days in the process, these recommendations are consistent with what we have been saying is required to future-proof our health care system." He also stated that health care spending accounts for an incredible 20% of all government spending, indicating it could well be one of the major areas targeted in the budget.
While the company would certainly benefit should this recommendation be implemented, there are plenty of other things to like about the business. Although it recently increased its premiums across most of its products, NIB still remains one of Australia's most affordable health care funds, which should continue attracting more and more customers.
With a solid balance sheet, strong management team and an attractive outlook (it is currently forecasting operating profit to be between $73 and $80 million for FY2014), it also offers a 3.7% fully franked dividend which is generous by anyone's measure.
Foolish takeaway
In addition to NIB Holdings, which would be a standout winner from the changes, Australia's largest private hospital operator Ramsay Health Care Limited (ASX: RHC) would also be a solid investment choice.
