Sector Wrap: Big health insurers trade higher

NEW YORK (AP) — Shares of the biggest health insurance companies rose Thursday after the end of oral arguments in the Supreme Court case on the U.S. health care reform law.

The court is expected to make a decision in June on the health care legislation, which President Obama signed into law in March 2010 after months of public and Congressional debate. Some parts of the law are already in effect, but major provisions including the mandate requiring most people to buy health insurance don't kick in until 2014.

The mandate is arguably the most controversial part of the law, and for health insurers, it would mean a big increase in both customers and expenses.

While it's difficult to predict what the court will do based on oral arguments, analysts Dave Shove of BMO Capital Markets and Sarah James of Wedbush both said that the Medicaid expansion part of the law is probably safe. More than half of the 30 million people who would gain health insurance coverage under the new law would be covered through Medicaid.

James said she spoke to a panel of three legal experts, and all the panelists think the court will uphold the Medicaid provision.

"It is almost inconceivable the court would find the Medicaid expansion unconstitutional since a law has never been found unconstitutional under the argument the states (who are opposed to the law) are using," she wrote, summarizing the panelists' views. James said investors are expecting the same outcome.

Shove wrote that that the Medicaid expansion is similar to other changes made since Medicaid was created in 1965.

Shove said health insurance stocks should do well until the ruling comes down because business trends have been strong and should surpass Wall Street expectations. Shove rates shares of UnitedHealth Group Inc., WellPoint Inc. and Aetna Inc. "Outperform," and he has "Market Perform" ratings on seven other companies in the industry.

UnitedHealth is the largest health insurer in terms of revenue, and WellPoint is the largest by enrollment. Shares of UnitedHealth rose $2.67, or 4.8 percent, to $58.11 Thursday and WellPoint's stock picked up $1.62, or 2.3 percent, to $71.62. Aetna shares gained $3.04, or 6.5 percent, to $49.56.

Shove said he expects the law to be altered in Congress in 2013 no matter what the court decides, but he expects the individual mandate will be stricken from the law.

"We expect the Justices to hold that the mandate is unconstitutional and sever it from the law, forcing Congress to rework this legislative Rube Goldberg machine," Shove wrote in a note to clients.

Also trading higher were shares of Humana Inc., which added $2.90, or 3.3 percent, to $91.54, and Cigna Corp., which advanced $1.90, or 4 percent, to $48.97.

James said it will be good for Medicaid-focused insurers like Centene Corp., Molina Healthcare Inc., Amerigroup Corp., and WellCare Health Plans Inc. if the Medicaid provision is upheld. However those stocks were little changed on Thursday: Centene shares lost 28 cents to $47.45, Molina shares fell 29 cents to $33.44, Amerigroup shares declined $1.35 to $65.63, and WellCare stock rose 73 cents to $70.58.

View the original article here

Cramer: Two Buys in the Health-Care Sector

Cramer: Two Buys in the Health-Care Sector

Sorry, I could not read the content fromt this page.

View the original article here

Sector Snap: Health insurers

NEW YORK (AP) — Starting with UnitedHealth on Thursday, health insurers will report their fourth-quarter results over the next two weeks, and a Jefferies & Co. analyst expects the companies and their stocks to do well in early 2012.

Analyst David Windley said he expects to see "solid" fourth quarter results because health care use is still low. He expects that trend to continue in early 2012, causing the stocks to trade higher.

Consumers are visiting the doctor less often and having fewer elective medical procedures as they try to save money, so health care use has been rising more slowly than companies expected when they set their premiums. That means health insurers will profits will be larger than expected.

Windley said enrollment in Medicare Advantage plans should be strong. Medicare Advantage plans are privately run versions of the government's Medicare insurance for the elderly and disabled. Interest in those plans is expected to grow as baby boomers age and become eligible.

The analyst said UnitedHealth Group Inc., the largest health insurer in terms of revenue, "has the best risk/reward profile in a still risk-averse market" because of its size and its advantages in pricing. He raised his price target for its shares to $68 from $60 and maintained a "Buy" rating for stock in the company, which is based in Minnetonka, Minn.

Windley also rates shares Aetna Inc., Cigna, Humana Inc., and WellPoint Inc. at "Buy." He rates Health Net Inc. at "Hold."

Windley expects Cigna and WellPoint to give 2012 annual guidance when they report their quarterly results. WellPoint is the largest health insurer in terms of membership, and analysts expect it to report a profit of $7.76 per share in 2012, according to FactSet. For Cigna, analysts expect a profit of $5.64 per share.

WellPoint reports its fourth-quarter results on Jan. 25, while Cigna will make its report on Feb. 2.

Here's how the industry's stock performed Tuesday as the overall markets rose modestly:

— Shares of UnitedHealth rose 72 cents to $53.42 in afternoon trading;

— WellPoint stock picked up 88 cents to $72.79;

— Cigna shares gained $1.24, or 2.7 percent, to $46.85;

— Humana shares rose 54 cents to $95.25;

— Aetna stock climbed 86 cents, or almost 2 percent, to $44.56; and

— Health Net shares rose 60 cents to $35.19.

View the original article here