The healthcare space faced another huge blow on Thursday when the largest U.S. health insurer UnitedHealth Group (UNH - Analyst Report) slashed its full-year outlook, citing larger-than-expected loss from the Affordable Care Act or Obamacare.

The company has been struggling from deteriorating individual exchange product performance and has lost hundreds of millions of dollars on the program. As a result, it scaled back its marketing efforts for the products in 2016 and could entirely quit Obamacare after 2016.

The insurer also revealed that the longevity and growth of Obamacare is diminishing with many people dropping the policies after receiving the Medicare service as per their coverage. As a result, UnitedHealth projects a loss of up to $425 million or 26 cents per share from the Obamacare plans in 2015 (read: Obamacare is Here to Stay: 3 ETFs to Buy).

Given the loss from the program, the company cut its earnings per share guidance to $6 from $6.25–$6.35 for the current fiscal year and provided earnings per share guidance of $7.10–$7.30 for fiscal 2016.

Market Impact

Following the move, UNH shares moved down as much as 6.5% on the day to finally close down 5.6%. It has also sparked broad-based concerns over the sustainability of the Obamacare law and shaken the broad healthcare space, especially the health insurers. Anthem (ANTM - Analyst Report), Aetna (AET - Analyst Report), Humana (HUM - Analyst Report) and Cigna Corp (CI - Analyst Report) have lost 6.9%, 6.5%, 4% and 5.4%, respectively.
 
The terrible trading in the stock world also sent the healthcare ETFs’ space into deep red on the day. In particular, iShares U.S. Healthcare Providers ETF (IHF- ETF report) stole the show plunging 4.2%, followed by declines of 3.1% for SPDR S&P Health Care Services ETF (XHS - ETF report) and 2.8% for PowerShares Dynamic Healthcare Sector Portfolio (PTH - ETF report).
 
Below we profile these ETFs in detail and discuss some of the specifics behind their recent slump (see: all the Health care ETFs here):

IHF

This ETF provides exposure to 52 companies that provide health insurance, diagnostics and specialized treatment by tracking the Dow Jones U.S. Select Healthcare Providers Index. About half of the portfolio is dominated by managed care firms while healthcare services and healthcare facilities round off the top three. The crushed stocks – UNH, AET, ANTM, CI and HUM – are among the top six holdings that collectively accounts for 36.1% of assets.

The fund has amassed $817.7 million in its asset base while charging 43 bps in annual fees. Volume is good as it exchanges 153,000 shares a day on average. IHF fell nearly 4.2% on the day and has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook.

XHS

This product uses the equal weight methodology by tracking the S&P Health Care Services Select Industry Index. Holding 58 stocks in its basket, the in-focus firms hold around 2% share each. From an industry look, healthcare services accounts for one-third of the portfolio while healthcare facilities, managed healthcare and healthcare distributors take the remainder.

This is often an overlooked fund with AUM of $193.9 million and average daily volume of less than 33,000 shares. The product charges 35 bps in annual fees and has lost 3.1% on the day. It has a Zacks ETF Rank of 1 with a Medium risk outlook.

PTH

This fund follows the DWA Healthcare Technical Leaders Index and holds a basket of 46 U.S. companies. The product has AUM of $253.4 million and trades in lower volume of 56,000 shares. Expense ratio came in at 0.60%. Though half of the portfolio is allotted to biotechnology, healthcare providers and services, and healthcare equipment and supplies round off the next two spots with 17.4% and 15.4%, respectively.

As a result, the fund has been impacted by the UnitedHealth malaise and dropped 2.8% on the day. It has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook.