Seeing Public Subsidy (Not Public Option) Investors Flock to Health Insurers

Investors are seeing the Senate's version of health care reform as a massive public subsidy for insurance companies -- and as a result, are sending the sector's stock prices shooting up, up, up. Stripped of a government-run insurance plan, the bill would give tens of millions of Americans no option but to start paying hefty premiums to private companies.

The rise in stock prices has been particularly striking in the period since Sen. Joe Lieberman (I-Conn.) said on October 27 that he would filibuster a Senate health care reform bill if it included a public option - a threat that caused Senate leaders to cave without much of a fight.

Here's a quick breakdown of major health insurance company stock performance from Oct. 27 to Friday's market close:

• Coventry Health Care, Inc. is up 31.6 percent;
• CIGNA Corp. is up 29.1 percent;
• Aetna Inc. is up 27.1 percent;
• WellPoint, Inc. is up 26.6 percent;
• UnitedHealth Group Inc. is up 20.5 percent;
• And Humana Inc. is up 13.6 percent.

By comparsion, the Dow Jones Industrial Average is only up 2.3 percent during that time; the NASDAQ Composite is up a (relatively) paltry 1.4 percent.

Reuters noted the big bump Monday morning, after the bill passed the first critical test in the Senate:

"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."

Thanks to Lieberman's threat, health insurance companies dodged a major competitor that could have lowered margins, siphoned off customers and impacted profits.

Source: Google Finance

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Comments

[my obama kos]

01:11 PM on 12/23/2009

We need a job stimulus instead of the usual empty talk. there is no economic recovery until healthcare is passed and people have jobs.

good articles: http://iamned111.blogspot.com/

[mountainweb]

09:40 AM on 12/24/2009

The health care bill will not bring economic recovery to anyone but the insurance companies that obama sold out to. The democratic party is going to TAX the average American. The money goes to the banks and insurance companies that democrats own stock in.....and that are paying them....

[1shamus1]

04:51 AM on 12/23/2009

Joey Lieberman made no bones about being put off by the exuberance of Rep Anthony Wiener,
concerning the Health-Care Bill, I wonder where his outrage stands on this?

As if!!

[curiousasheck]

12:44 PM on 12/22/2009

Nice little pump there but don't want to be to obvious and run it up to a +890.99% gain in one day.

[CanadianBeef]

12:39 PM on 12/22/2009

Fascinating idea, having the government pay the private sector to do the job of government. My American cousins have banged the square peg into the round hole. It does seem a pretty desperate way to guarantee health insurance. I didn't realize that health reform meant subsidizing the private sector instead of challenging its failures.

[lisakaz2]

03:50 PM on 12/22/2009

That's exactly what it is: a bailout or transfer of wealth from govt to corporations to pay for a job that's intrinsic to the commonweal of the nation.

[josephebacon]

08:39 AM on 12/23/2009

What you say is the absolute truth. Ever since Reagan came into power, we've had the endless mantra against big government pounded into our heads by our corporate controlled media. The same media that keeps telling us how terrible the Canadian health care system is, how people wait years to get the cancer surgery they need, and how people wait and wait and wait in lines at the ER for rationed care. Funny how my Canadian friends laugh at these allegations. Sadly, millions of Americans are brainwashed into believing them!

[shivasquest]

12:16 PM on 12/22/2009

Socializing the cost privatizing the profit.Whats not to like.

[CanadianBeef]

12:34 PM on 12/22/2009

Three words to describe this reform: punitive (mandates), slow (2014) and inefficient (pays the private sector to do government's job).

[WinterParkMom]

12:06 PM on 12/22/2009

Heres the reason why their stocks are going up....There are no consumer protections along with this mandate. They will be able to charge you your arm and leg if you have a pre-existing condition. Take your firstborn because you won't be able to pay the deductible for the hospital stay. We need the following along with a mandate:
-No annual or lifetime limits on coverage.
-premiums based on income, and strict regulation of this. No charging sick or old more than young & healthy.
-annual caps on out of pocket expenses including, deductibles, co-pay's, medicine
-No rate can be raised for 5 years for new customers and only every 2 years for existing ones
-Rate increases capped at 1%
-Minimum fine of $100k if a customer in good standing is dropped
-Cri m inal charges on the individual who makes the decision to drop a customer and the customer dies as a result.
-if customer is unemployed or has taken a pay cut, then they have to keep the premiums as is or lower them (back to the income based rates)
If you had these protections built in, it would almost be as good as a public option.

[hackerblaster]

05:41 PM on 12/22/2009

Wow, this is awesome! Get your a/ss to DC!

[WinterParkMom]

08:54 PM on 12/22/2009

LOL! Thanks.

[CanadianBeef]

11:59 AM on 12/22/2009

Insurance companies do no useful work, when you think about it. They are pure and simple parasites, raking $500 billion a year in administrative fees for standing between you and your doctor.
Not all business activity needs to be done. Some business is just waste, monopoly and extortion. But because business IS religion in the US, most Americans cannot grasp this simple fact.
So go on being corporate slaves if you want to, afraid of being called a socialist. Keep working 50 weeks a year to keep your health care, while any German waitress gets six weeks paid holidays and guaranteed medical. Keep drinking the right-wing Kool Aid. Keep running those SUVs to enrich Saudi Princes. And never, ever, question corporate authority.

[Robson]

10:34 AM on 12/23/2009

The right wing corporate media has demonstrated their ability to convince many average Americans that policies of fair treatment (such as the following) that would benefit those same people is un-American.

- being paid a reasonable wage,
- provided with sufficient vacation time to reduce stress and provide improved family values,
- a backstop that guarantees individuals will not go bankrupt due to a health condition that makes one unable to work,
- a meaningful and secure pension system for all
- a higher education system that is affordable and accessible to those with the will and ability,
- provide opportunities for all instead of only those who are already successful.

The brainwashed masses are convinced such policies are provided only by “evil socialist” governments of Europe and Canada. Our USA government, instead of helping the masses pull themselves up, have policies that help those already with excessive disposable wealth because they can and do pull the strings of government.

[Kopie]

11:56 AM on 12/22/2009

Oh my, more scary charts like with the climate change hoax. The carbon commodity is taking a dive so this is just the universe's way of balancing itself out as it always has.

[CanadianBeef]

12:09 PM on 12/22/2009

I think you're looking for the climate-change-denial blog site. I find it amazing there are peolple who still doubt that humans are able to dramatically alter the planet's health. Too selfish to change themselves, I guess.

[Kopie]

12:38 PM on 12/22/2009

I'm a conservationist. I bicycle to work and often carry a messenger bag that I fill up with littered bottles and cans that I take to the recycle center. I want a pretty city for selfish reasons (I don't like to look at trash; resale values) and also like to set good example for my kids. But to deny that the carbon credit trade isn't just another money funnel for the carbon cartel? It's just like oil, but plant life actually thrives in it. Carbon monoxide is bad. Carbon dioxide is getting "thrown under the bus" and demonized so alarmists can make a buck off it while they tell you they are saving you with a twinkle in their eye. Polluters will continue to pollute, and energy companies will just pass that expense along to the consumer.

[PragmaticStatistic]

11:37 AM on 12/22/2009

It just happens that over the next 20 years health care insurers are facing the following crisis that will require a government bailout:
1) An anticipated rise in health care expenses due to working Baby Boomer policyholders who are between the age of 50 and retirement age.
2) An anticipated drop in the number of policyholders due to the dying and retiring of other Baby Boomers who represent the largest pool of high income producing policyholders.
3) An anticipated drop in the number of younger middle-class and poor policyholders who can no longer afford health care because of the increase in the number of employers not offering health care benefits, or requiring a large portion of employee contributions.

Here is how the government/health care industry compromised bailout will work:
1) It mandates that those uninsured customers they lost must now obtain what might be government-subsidized discount private-label heath care insurance from the private sector in order to recapture the industry’s lost business due to the high cost of health care insurance
2) It moves the industry’s liabilities for those over 50 on to government run Medicare in order to have the government subsidize them, while enabling the private insurer to sell those over 50 Medicare Supplement Insurance.
3) Like private label groceries, private label health care insurance could add billions in income to an already over saturated market that is loosing business to economic concerns, without eroding the market share of their main branded products.

[aonemandog]

11:27 AM on 12/22/2009

This pretty much tells you who came out ahead on the health care "reform;" and, no, it was not the average American who will now be saddled with the costs of this Obama/Senate/Congress Christmas gift to their true masters. It all makes me physically ill. Instead of coming on TV and proclaiming victory, Obama should be apolgizing for letting us down (again).

[kcmookie]

11:45 AM on 12/22/2009

Yeah, speculation in the market on impact this legislation will have must be gospel, can't see any problems with that. Oh, and if you read something on the inner nets, it must be true.

[kinnycut]

10:23 AM on 12/22/2009

People shouldn't be in a hurry to buy into the insurance stock jump hype put out by these stupid political pundits and television know it alls as a reason to be against this health care reform bill. The plain and simple fact is their chatter slamming the health care bill is one of the things triggering the insurance stock rise, and the reality is stock prices going up for the insurance industry on the heels of passage of any health care bill regardless of what provisions were, or were not in the final bill was a forgone conclusion because those stocks were down during discussions, and just like when a large company is sued the stocks rise after the conclusion of the suit. In other words, stock prices move upward once a company or companies know exactly what is going to cost them. Why wouldn't insurance, and pharmaceutical stocks not go up because no matter how the reform went their customer bases would have expanded exponentially?

[rollingdivision]

10:06 AM on 12/22/2009

Just how bad is Obamacare? Here are some of the proposal's most important flaws, as described by one of the proposal's most passionate critics:

* It forces you to pay up to 8 percent of your income to private insurance corporations -- whether you want to or not.
* If you refuse to buy the insurance, you'll have to pay penalties of up to 2 percent of your annual income to the Internal Revenue Service.
* After being forced to pay thousands in premiums for junk insurance, you can still be on the hook for up to $11,900 a year in out-of-pocket medical expenses.
* Many of the taxes to pay for the bill start now, but most Americans won't see any benefits -- like an end to discrimination against those with pre-existing conditions -- until 2014 when the program begins.
* It allows insurance companies to charge older people 300 percent more than other customers.
* The cost of medical care will continue to rise, and insurance premiums for a family of four will rise an average of $1,000 a year -- meaning in 10 years, you family's insurance premium will be $10,000 more annually than it is right now.

Care to guess the name of the Obamacare critic who pointed out these and many more flaws in the bill? Try Jane Hamsher of Fire Dog Lake, who called Obamacare "a con job."

[laaambchop]

11:01 AM on 12/22/2009

sigh, I know. Single Payer would be so much better...

[ksjprod]

11:44 AM on 12/22/2009

Obama has had NOTHING to do with drafting this legislation. Why call it Obamacare? Call it LackofObamacare.

[TimnySlagle]

10:03 AM on 12/22/2009

Well Duh!

Now that 30 million uninsured will have the choice of buying Health Insurance or facing prison time, it's going to be boom time in Insuranceville.

[CanadianBeef]

11:50 AM on 12/22/2009

I call Right-Wing Myth. Prison time?

[laaambchop]

01:26 PM on 12/22/2009

only if new investor owned prisons pop up...ohWait...

[TimnySlagle]

01:35 PM on 12/22/2009

"• Section 7203 — misdemeanor willful failure to pay is punishable by a fine of up to $25,000 and/or imprisonment of up to one year.

• Section 7201 — felony willful evasion is punishable by a fine of up to $250,000 and/or imprisonment of up to five years.” [page 3]"

[psfurlong356]

09:46 AM on 12/22/2009

Please look at the charts.
Health care stocks have responded exactly in line with the rest of the market. The bottom was March 5th this year and look at almost any chart and you will see a gradual ramp UP in stock price since then.

Market forces across the spectrum.

[OneTruePatriot]

12:07 PM on 12/22/2009

I thought so at first glance as well, but no the DJI is plotted along with the insurance tickers. The market ramp up has been since march, this all happened in the last 6 weeks or so.

[tbone99]

09:39 AM on 12/22/2009

The healthcare industry will soon have the clout , given our monies,that will allow them to dictate coverage and premiums .They will be essentially too big to be regulated .

The numbers they represent will allow them to replace Medicare as the dictator of standards of care.and healthcare excellence will decline . In addition they will demand staffing cuts from hospitals and decreased worker benefits in order to make their payments to hospitals ,even less. They may refuse to do business with hospitals that have unions.

This handover to corporate power will drastically diminish the quality of healthcare we receive and hurt healthcare workers.