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.

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ICB Trade Lines - Piggyback Credit Increases FICO Score

Fair Isaac Corp., the company responsible for FICO credit scores, has decided that when it unveils a new version of its credit score system in September, it will close the loophole that allowed piggybacking.

Angry proponents of piggybacking say they'll organize a grass-roots campaign to fight against the change.

With piggybacking, a consumer with poor credit is placed as authorized user on the credit card of a person with a stellar credit history. Authorized users benefit from having the payment history of the primary cardholders show up on their credit reports, thereby improving their credit scores.

Lenders have complained that it is fraud and distorts the credit score system.

Internet companies have created an industry by playing middleman -- paying a small sum to those with good credit to take on those with bad credit as authorized users, then collecting healthy fees from those consumers.

Now one of those Web-based firms has threatened to organize an effort to expose problems in the credit scoring system.

"Our very existence (proves) that the FICO system is so flawed," says John Coates, spokesman for Instant Credit Builders based in Largo, Fla.

Fair Isaac says that starting in September it will ignore authorized users as it calculates the renowned FICO credit score.

"Fair Isaac has become aware that Web-based services are using authorized trade lines to defraud lenders," says Craig Watts, spokesman for Fair Isaac. "While we work with the financial services industry on an industry solution, we wanted to protect lenders and FICO scores."

The FICO credit score is used by lenders to assess risk in lending money. Lenders factor this number, which can range from 300 to 850, in credit decisions. Watts says 90 percent of the largest U.S. banks base their loan decisions on FICO credit scores.

Watts says the change will prevent people from misleading lenders about their true credit risk.

Coates argues the system can't be easily changed.

"Maybe our system can definitely show you, OK, there seems like there's a loophole and there are flaws that increase the score. You know what? There are also a zillion flaws that decrease the people's scores."

He says Instant Credit Builders plans to bring to light every flaw in the credit scoring system.

"We are building a community of people that are going to stand up. We will petition against it and we are actually going to formulate plans to work together as a grassroots effort to actually create a financial revolution," he says.

Those who rent credit histories won't be the only ones suffering a loss. Often parents will attempt to give their children a jump-start on a good or improved credit history, and they'll be taking a hit as well.

View the original article here

ICB Trade Lines - Piggyback Credit Increases FICO Score

Fair Isaac Corp., the company responsible for FICO credit scores, has decided that when it unveils a new version of its credit score system in September, it will close the loophole that allowed piggybacking.

Angry proponents of piggybacking say they'll organize a grass-roots campaign to fight against the change.

With piggybacking, a consumer with poor credit is placed as authorized user on the credit card of a person with a stellar credit history. Authorized users benefit from having the payment history of the primary cardholders show up on their credit reports, thereby improving their credit scores.

Lenders have complained that it is fraud and distorts the credit score system.

Internet companies have created an industry by playing middleman -- paying a small sum to those with good credit to take on those with bad credit as authorized users, then collecting healthy fees from those consumers.

Now one of those Web-based firms has threatened to organize an effort to expose problems in the credit scoring system.

"Our very existence (proves) that the FICO system is so flawed," says John Coates, spokesman for Instant Credit Builders based in Largo, Fla.

Fair Isaac says that starting in September it will ignore authorized users as it calculates the renowned FICO credit score.

"Fair Isaac has become aware that Web-based services are using authorized trade lines to defraud lenders," says Craig Watts, spokesman for Fair Isaac. "While we work with the financial services industry on an industry solution, we wanted to protect lenders and FICO scores."

The FICO credit score is used by lenders to assess risk in lending money. Lenders factor this number, which can range from 300 to 850, in credit decisions. Watts says 90 percent of the largest U.S. banks base their loan decisions on FICO credit scores.

Watts says the change will prevent people from misleading lenders about their true credit risk.

Coates argues the system can't be easily changed.

"Maybe our system can definitely show you, OK, there seems like there's a loophole and there are flaws that increase the score. You know what? There are also a zillion flaws that decrease the people's scores."

He says Instant Credit Builders plans to bring to light every flaw in the credit scoring system.

"We are building a community of people that are going to stand up. We will petition against it and we are actually going to formulate plans to work together as a grassroots effort to actually create a financial revolution," he says.

Those who rent credit histories won't be the only ones suffering a loss. Often parents will attempt to give their children a jump-start on a good or improved credit history, and they'll be taking a hit as well.

View the original article here

ICB Trade Lines - Piggyback Credit Increases FICO Score

Fair Isaac Corp., the company responsible for FICO credit scores, has decided that when it unveils a new version of its credit score system in September, it will close the loophole that allowed piggybacking.

Angry proponents of piggybacking say they'll organize a grass-roots campaign to fight against the change.

With piggybacking, a consumer with poor credit is placed as authorized user on the credit card of a person with a stellar credit history. Authorized users benefit from having the payment history of the primary cardholders show up on their credit reports, thereby improving their credit scores.

Lenders have complained that it is fraud and distorts the credit score system.

Internet companies have created an industry by playing middleman -- paying a small sum to those with good credit to take on those with bad credit as authorized users, then collecting healthy fees from those consumers.

Now one of those Web-based firms has threatened to organize an effort to expose problems in the credit scoring system.

"Our very existence (proves) that the FICO system is so flawed," says John Coates, spokesman for Instant Credit Builders based in Largo, Fla.

Fair Isaac says that starting in September it will ignore authorized users as it calculates the renowned FICO credit score.

"Fair Isaac has become aware that Web-based services are using authorized trade lines to defraud lenders," says Craig Watts, spokesman for Fair Isaac. "While we work with the financial services industry on an industry solution, we wanted to protect lenders and FICO scores."

The FICO credit score is used by lenders to assess risk in lending money. Lenders factor this number, which can range from 300 to 850, in credit decisions. Watts says 90 percent of the largest U.S. banks base their loan decisions on FICO credit scores.

Watts says the change will prevent people from misleading lenders about their true credit risk.

Coates argues the system can't be easily changed.

"Maybe our system can definitely show you, OK, there seems like there's a loophole and there are flaws that increase the score. You know what? There are also a zillion flaws that decrease the people's scores."

He says Instant Credit Builders plans to bring to light every flaw in the credit scoring system.

"We are building a community of people that are going to stand up. We will petition against it and we are actually going to formulate plans to work together as a grassroots effort to actually create a financial revolution," he says.

Those who rent credit histories won't be the only ones suffering a loss. Often parents will attempt to give their children a jump-start on a good or improved credit history, and they'll be taking a hit as well.

View the original article here