Health Insurance Company Stock Prices Say it All

[Joanne98]

For OpEdNews: background n015e - Writer

Dylan Rattigan on MSNBC recently gave Rep. Wassersman-Schulz (D-Fl) a hard time about the health care package. He disputed her contention the bill was a big win for consumers. He wanted to know why the stock prices for Big Insurers (e.g.m, Aetna, Cigna, Wellpoint, United Health) shot up if this was such a big loss for them.

Unfortunately, he was so exercised on the point, he didn't give her a chance to address the question. It's an important question. Asked another way, the question is "Why are stocks in this sector at a 52-week high if this legislation is such a blow to their profits?"

That's worth investigating. Follow the money and things get real clear real fast.


The validity of Rattigan's point is clear even with this thumbnail of a stock chart. This chart covers the last three months. It compares the S&P 500 to stock prices for some large health insurance companies. Each one is represented by a different color as follows:

S&P 500 (brown), Cigna (red), Aetna (blue), Wellpoint (gold), and United Health (green).

TheS&P 500, a broad indicator of the market, fluctuates but islargely unchanged. However, all the health insurers fell towards the end of September, for an average loss of about 12%. They stayed down throughout October. However, they started rising in November to reverse their losses. Last week they all moved again.This time to gain over the S&P. In sum, over the last three months, these stocks have posted an average 10% gain, after making up their losses. That's about a 20% swing in value. That's a big move compared to the overall market.

It's true these stocks are more volatile than the overall index. That's the point of the index, to smooth out volatility. The fact these stocks all move in concert shows they are being affected by the same forces. That's not surprising. Stocks in the same sector should be responding in roughly similar ways to the same news. The interesting point is when they made their moves. That reflects the conversation of the time.

Where were we in mid-September?

On September 9, Obama had made a clear pitch for the public option in his speech on health care. This resonated with the public. A CBS poll from that time showed growing public suport for a public option. The reason people argue for a public option is to provide a competitive break on run away prices. That would not be good for profits. The stocks fell.

Where were we in early November?

Lieberman had become the center of attention. He made it clear he wasn't supporting a public option. Of course, it was not just Joe blowing smoke that moved the stocks. Even if he did support it, the public option was so diluted it wouldn't matter. As Ezra Klien noted, the public option at that point wouldn't be available to 90% of the people in states that allowed it. Nor would it have any pricing leverage over private competitors. Basically it was going to be hollow. Safe in the knowledge their profits weren't going to get hammered, the stocks started to rise.
What happened in early December?

On December 10th, Pelosi caved on the public option. That followed the death of expanded Medicare. That killed any hope the House would force this back on track. In other words, the profits of these companies are going to be just fine. Once again, stock values jumped.

CHARTS AT LINK

http://www.opednews.com/articles/Health-insurance-company-s-by-background-n015e-091220-88.html

[tomm2thumbs]

1. they always say 'the market tells the truth'

guess they can't back away from that now - because that speaks volumes

[thelordofhell]

2. Giving a shit about legalized gambling

Is what got us in the financial quagmire in the first place.

Re-regulate the markets

Eliminate monopoly protection for insurance companies

Wait for the bill reconcilliation



These stocks will drop like a rock