WellPoint and Health Care & Insurance

WellPoint stock bucks market plunge

August 17, 2009

The stock market took a nosedive this morning, but news that the Obama administration might be willing to drop the idea of a government-run health insurance plan gave a big boost to Indianapolis-based insurer WellPoint Inc.

WellPoint’s stock rose more than 5 percent in morning trading, hitting $55.09 per share before settling back a bit later in the day.

Elsewhere this morning, stocks plunged and Treasury prices soared as investors around the world feared that consumers are too anxious to lift the economy into recovery. The losses on stock exchanges extended the heavy selling that began Friday with a disappointing reading on consumer confidence. And bond investors, once again searching for a safe investment, bought heavily into Treasuries.

The Dow Jones industrial index fell more than 180 points, or about 2 percent, this morning. Overseas, the Shanghai stock market dropped almost 6 percent and the major indexes in Europe were all down more than 1.5 percent.

WellPoint was able to buck the overall market trend because President Barack Obama indicated he is willing to embrace insurance cooperatives over a government-run plan as the White House faces mounting opposition to its broad overhaul of the nation's health care system.

Bowing to Republican pressure and offering political cover to fiscally conservative Democrats, Obama's administration signaled yesterday that it is ready to abandon the idea of giving Americans the option of government-run insurance. The shift leaves open a chance for compromise with Republicans that probably is already enraging Obama's liberal supporters but could deliver a much-needed victory on a top domestic priority.

Officials from both political parties are looking for concessions while Congress is on an August recess. Facing tough audiences, lawmakers and the White House are looking for a way to cover the nation's uninsured while maintaining political standing.

Health and Human Services Secretary Kathleen Sebelius said that a government alternative to private health insurance is "not the essential element" of the administration's health care overhaul. The White House would be open to co-ops, she said, a sign that Democrats want a compromise so they can declare a victory.

Under a proposal by Sen. Kent Conrad (D-N.D.), consumer-owned not-for-profit cooperatives would sell insurance in competition with private industry, not unlike the way electric and agriculture co-ops operate, especially in rural states such as his own.

With $3 billion to $4 billion in initial support from the government, the co-ops would operate under a national structure with state affiliates, but independent of the government. They would be required to maintain the type of financial reserves that private companies are required to keep in case of unexpectedly high claims.

"I think there will be a competitor to private insurers," Sebelius said. "That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing."
Obama's spokesman refused to say a public option was a make-or-break choice.

"What I am saying is the bottom line for this for the president is, what we have to have is choice and competition in the insurance market," White House press secretary Robert Gibbs said yesterday.

A day before, Obama appeared to hedge his bets.

"All I'm saying is, though, that the public option, whether we have it or we don't have it, is not the entirety of health care reform," Obama said at a town hall meeting in Grand Junction, Colo. "This is just one sliver of it, one aspect of it."

Lawmakers have discussed the co-op model for months, although the Democratic leadership and the White House have said they prefer a government-run option.

Conrad, chairman of the Senate Budget Committee, called the argument for a government-run public plan little more than a "wasted effort." He added there are enough votes in the Senate for a cooperative plan.

Sen. Richard Shelby (R-Ala.) said Obama's team is making a political calculation and embracing the co-op alternative as "a step away from the government takeover of the health care system" that the GOP has pummeled.

"I don't know if it will do everything people want, but we ought to look at it. I think it's a far cry from the original proposals," he said.

Meanwhile today, stocks were down across all industries as investors worried that consumers' reluctance to spend will hurt corporate earnings. Many companies reported second-quarter results that were boosted by cost-cutting, not higher sales, and the fear is that without a pickup in sales, earnings will fall.

Traders got more bad news about the consumer today when home improvement retailer Lowe's Cos. said poor weather and cautious consumer spending caused sales to fall 19 percent in the second quarter. Lowe's missed analysts' forecasts.
 

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