Cuban's Health Insurance Call a Challenge for Passive Investors

Mark Cuban has called on investors to divest from major health insurers, accusing them of putting shareholder interests ahead of patient care. The billionaire entrepreneur cited examples of underpayment and delayed payments to healthcare providers, as well as the practice of clawing back payments and obscuring contract terms.

However, for passive investors who own broad-market ETFs, avoiding these companies is not straightforward. Funds like Vanguard Total Stock Market ETF (VTI) hold a diverse portfolio that includes major insurers such as UnitedHealth Group Inc (UNH), CVS Health Corp (CVS), Cigna Group (CI), Elevance Health Inc (ELV), Humana Inc (HUM), and Centene Corp (CNC).

Cuban's proposal is more complicated for passive investors because broad-market ETFs are designed to track indexes rather than selectively exclude companies. An investor holding VTI, Vanguard S&P 500 ETF (VOO) or State Street SPDR S&P 500 ETF Trust (SPY) may not be making a deliberate bet on health insurance, but simply seeking diversified exposure to U.S. equities.