Health care companies play let's make a deal (CI, AET, HUM, UNH, WLP, CVH, THC, HLS)
Managed health care company stocks are rising Tuesday despite press reports that hospitals will contribute $155 billion over 10 years toward insuring the nearly 50 million Americans who do not have coverage.
The cuts would largely come from the amount the insurers receive as reimbursement from Medicare and Medicaid.
Shares of Cigna corp. (NYSE: CI), Aetna Inc. (NYSE: AET), Humana Inc (NYSE: HUM), and UnitedHealthGroup Inc (NYSE: UNH) each are up more than 4 percent in early trading, with shares of WellPoint Inc. (NYSE: WLP) and Coventry Health Care Inc. (CVH) also on the rise.
The agreement, which may be announced as early as tomorrow, may help solidify bipartisan health care reform that includes a large role for private insurers. At minimum, it may help the industry plan for a controlled transition away from Medicare and Medicaid, and toward a system that may vastly increases the number of privately insured individuals.
It’s a goal that may vastly expand the market for the managed care companies with government subsidies for those who cannot afford coverage, in exchange for the insurers agreeing not to exclude anyone due to pre-existing conditions.
While the health care group has remained beaten down for months, our group index which includes about three-dozen companies has risen 15 percent in the past 30 days, as the market begins to look at the group as a less risky endeavor, now that the managed care companies are at the negotiating table. The group has been led by Tenet Health Care (NYSE: THC), up more than 130 percnet, and socks including Healthsouth Corp (NYSE: HLS), up more than 50 percent.
The group is trading at a little more than 11 times forward 12-month earnings, vs. 13 times forward earnings for the S&P 500, even though earnings for health care companies may increase faster than earnings for the market at-large this year. — Mike Tarsala.
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