Senate Debate Impacts Health Care Stocks

Published: Fri 11 Dec 2009

Larry Roth

In the second day of health insurance stocks trading at especially strong values, U.S. senators called a time out in their debate over a proposed government-run insurance plan.

Senators voted 56 to 43 on Thursday to temporarily set aside the major health care legislation valued at the nearly $1 trillion so they can deal with a critical financial package to keep the lights on in some government departments.

Democrats sent the proposal under consideration to the Congressional Budget Office so the costs could be evaluated. It likely will be next week before the analysis is completed.

Republications says the move to get Budget Office analysts involved and resulting in a temporary delay of action on the health care plan shows the Democrats are at odds among themselves over what to do. The Democrats acknowledge they don't have all 60 votes that would be needed to OK the health care legislation.

Both sides also are paying attention to what the nation is saying. The latest CNN poll shows only 36 percent of those surveyed support the health care plan backed by the Obama administration. Among the remaining respondents, 61 percent said they were against it.

Meanwhile, stocks in health insurance companies are maintaining their gains in recent days of trading. The speculation is that investors are reacting to the growing belief that the Senate version of the bill won't have a pure public option in its final form. Investors have been concerned unfair competition would arise for the insurers because they would have to compete against an option that would have the financial backing of the federal government while reimbursement would be at artificially lower levels.

As a result of the positive, health care providers were the second-best performers in the Standard & Poor 500 on Thursday. For example, UnitedHealth reported a 6.4 percent jump in it stock's value as it closed at 30.31.

But investors are not out of the woods. Some Democrats are pushing for Medicare to be expanded to cover uninsured Americans who are 10 years younger than the current age requirement of 65. One analyst estimated that could move an additional 6 million people from coverage by the private companies to a government plan.

Another proposal making the rounds is the requirement that insurers to spend 90 percent of the health care premiums they receive, up from the 80 percent to 85 percent spent by many of the biggest providers.