NIB Holdings Ltd (ASX: NHF) is an ASX200 listed company and national provider of private health insurance.

It has risen 23.91% already in 2025, however broker Macquarie has raised some red flags for its future. 

For context, S&P/ASX 200 Health Care Index (ASX:XHJ) is down more than 7% over that same period. 

At the time of writing shares are trading at $6.84 each, however the broker has issued an "underperform" rating and 12 month price target of $5.55. 

Why is Macquarie pessimistic about the future of NIB Holdings?

According to a report issued on Tuesday, 

The Department of Employment and Workplace Relations (DEWR) has issued a "Request for Information" for the Pacific Australia Labour Mobility (PALM) scheme. Since FY21, NHF has been the preferred (not exclusive) partner, with ~97% customer conversion.

So what does this mean?

The Australian government is reviewing who provides health insurance for workers in its Pacific Australia Labour Mobility (PALM) scheme.

NIB is the main provider right now, but the government recently sent out a Request for Information (RFI) to explore other options. This could mean competition is coming or changes to the contract.

According to Macquarie, the RFI includes several questions that indicate NHF could face challenges retaining the contract.

We estimate PALM accounts for ~30% of customers in NHF's Workers portfolio, which in turn represent ~50% of customers in their IIHI division.

With multiple sub-divisions now experiencing operational headwinds, we retain our cautious outlook.

In summary, PALM customers currently account for 30% of NIB's Workers insurance.

Workers insurance accounts for 50% of NIB's international business.

If NIB loses this deal or it changes significantly, NIB's profits could take a hit.

What are other brokers saying?

NIB Holdings could be considered an example of a defensive stock. This is because demand for health insurance  products and services remains high even during an economic downturn when consumers reduce their overall spending.

This could be one reason it has fared well to start the year amidst uncertain global economic conditions. 

Despite Macquarie's cautious outlook, other brokers seem neutral on the stock price of NIB Holdings. 

Bell Potter currently has a target price of $7.00, suggesting the share price is close to fair value. 

Similarly, online brokerage platform SelfWealth lists the share price of the ASX200 stock as "near fair value" with an average price target of $7.03.

If the idea of a defensive stock is appealing for investors, here are three defensive ETFs that could be worth considering:

• BetaShares Global Healthcare ETF (ASX: DRUG)
• Vanguard Australian Government Bond Index ETF (ASX: VGB)
• VanEck Morningstar Wide Moat ETF (ASX: MOAT)