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Health insurance stocks flop after Obama wins second term

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Health insurance stocks sank deeper than the broader market Wednesday after President Barack Obama's re-election helped clarify the future of his health care overhaul, a sweeping law that some investors fear will pinch profits in the coming years.

The overhaul aims to cover millions of uninsured people. While that means new business for insurers, the law also imposes fees and coverage restrictions on the sector.

Starting in 2014, insurers will have to pay annual fees that total $8 billion that year and then climb to top $14 billion by 2018. The law restricts how much insurers can vary their pricing based on factors such as age and health—key tools they use to ensure that they have enough to cover medical claims.

It also stipulates, among other things, that insurers spend certain percentages of the premiums they collect on care, or pay rebates to customers.

Insurers like Indianapolis-based WellPoint Inc., with large portions of their business in the individual and small employer group markets, are expected to be affected the most by the fees and restrictions.

WellPoint's third-quarter earnings trumped Wall Street expectations, but the health insurer's stock tumbled after the election. Shares of WellPoint dropped 5.5 percent, or $3.35, to close at $57.85 Wednesday. Share were down 1.6 percent Thursday morning, to $56.91.

Investors also worry about online exchanges that will be set up as part of the overhaul to help people compare and buy insurance policies. Morningstar analyst Matt Coffina cites concerns that these exchanges will take customers from the more-profitable employer-sponsored coverage market.

The overhaul also cuts funding for Medicare Advantage plans, which are privately run versions of the government's Medicare program for the elderly and disabled. That could pressure profits for companies like Humana Inc., for which Medicare Advantage plans make up a large concentration of its business.

Other health insurers saw their stock drop Wednesday. Humana's stock sank 7.5 percent, or $5.75, to $70.41 per share. Shares of UnitedHealth Group Inc., the nation's largest insurer, dropped 3.5 percent, or $1.99, to $54.40. Aetna Inc. fell 3.6 percent, or $1.61, to $42.95.

The Standard & Poor's 500 index, meanwhile, was down about 2 percent.

Cigna Corp.'s stock dropped only 21 cents, to $53.12. Analysts see Cigna as being less vulnerable to reform, since it has a broader business portfolio than most of its competitors. That includes a growing international business.

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  • issues
    i agree healthcare needs a major overhaul, but saying healthcare is free and gov provided like obamacare is way off base. obamacare is going to destroy job growth. Also find it ironic that everywhere else its provided and BEST way to do things but for some reason people from other countries always seem to come to America to get proper care. Canadians love coming to America to get care instead of waiting 8 months for MRI.
  • don't thank Obama...
    ...thank Anthem for giving you crappy insurance while raising your rates over and over and over so they can continue to profit from others suffering...the BEST way to provide health care to ALL is universal single payer health insurance, it works everywhere in the world better than the US and costs LESS!
  • ACA
    Terry, my "rebate" check was $22. You were saying ...?
  • RJR - Read the ACA
    Suggest you read the Affordable Care Act. We received a rebate check this year, as promised by the Affordable Care Act. We received our coupon payment book for 2013, and our rates have declined for 2013. The best parts of the Affordable Care Act are the removal of the pre-existing condition clause, which allows us the option of shopping the market for better rates, and the removal of the lifetime cap. We have friends with college age children and they are very happy with the fact that their children can stay on their plan, even after graduation. Read the ACA, then ask yourself why the CEO of WellPoint needed to be paid $15 Million a year? The answer: Because profits were created by gouging the general public with higher than needed insurance premium fees. Ask your friends if they received their rebate checks yet.
    • health insurance flops
      Thanks Obama for giving us crappy third rate insurance

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