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

First Posted: 03/18/10 06:12 AM ET   Updated: 05/25/11 04:00 PM ET

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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