Everybody’s Happy
by digby
I had a friend snidely question not long ago asking if I was right about the medical insurance industry benefiting from the reforms, why weren’t investors flocking to them?
Healthcare shares rose on Monday as a bill to reform healthcare passed the first critical test in the Senate, without many of the provisions, such as a government-run health insurance option, that investors most feared would hurt profits.
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The S&P Healthcare Index rose 1.4 percent, while the Morgan Stanley Healthcare Payor stock index rose 3.6 percent. The S&P Managed Health Care index rose 4.6 percent.
“All in all, relative to the last version of health reform issued by the Senate, things have turned out pretty well for the health insurance industry,” said Carl McDonald, an analyst at Oppenheimer. “In particular, all versions of a government-run health plan have largely been eliminated.”
The original Senate bill taxed the health insurance industry a fixed $6.7 billion a year. Under the new proposal, the industry would face a $2 billion tax in 2011, with increases over time to $10 billion in 2017.
Analysts said the new proposal would allow insurers time to factor the tax into pricing.
The bill would require most Americans to have insurance, expanding the membership rolls for health insurers. At the same time, it replaces a proposed government-run public insurance option with less onerous exchanges to cover those who are not covered through their employment.
Matthew Borsch, an analyst at Goldman Sachs & Co., said Cigna Corp remains his favorite among health insurers.
“Aside from reform, the important backdrop to our sector view is fundamentals, which are decidedly mixed but with the key being that downside risk to commercial margins is mitigated by firming of industry pricing,” he said in a research note.
Shares of Cigna rose 5.3 percent to $37.69. Shares of Aetna Inc rose 5.84 percent to $34.41. Humana Inc rose 3.79 percent to $45.17 and United Health Group Inc rose 5 percent to $33.14. Shares of Wellpoint Inc rose 3.8 percent to $60.51.
As predicted, it would appear that the insurance industry feels confident that it can jack premiums through the roof for a while yet.
Let’s hope the congress has what it takes to fix that fairly quickly. Of course, it will take a lot of horror stories of misery and despair to make that happen, but that’s how it’s done these days. It’s not like they could have known …
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