Prospects for healthcare up, insurance stocks down

March 4, 2010


It may be a gamble, but at least one tell says that President Barack Obama and Democratic leaders in Congress may win the big bet they have made to push healthcare reform legislation over the finish line, despite public doubts and Republican opposition.

Just look at the healthcare provider stocks.  Health insurer shares were lower on Thursday in afternoon trading after the White House announced Obama would meet with several House Democrats in an apparent  bid to lock in votes.

“It looks like he’s really getting involved at the very micro level, and I think that probably shows the administration is really going to put everything on the line for this initiative,”  Morningstar analyst Matthew Coffina told Reuters correspondent  Lewis Krauskopf in New York.   “They’re kind of going for broke at this point.”

“The prospects of healthcare reform are up. Stocks are down,”  said Tim Nelson, a healthcare analyst with First American Funds. “These stocks go up and down with the prospects of healthcare reform.”

With the help of some well publicized health insurance premium increases, Democrats  have decided that they will be better off  in the November congressional elections having passed the sweeping healthcare overhaul than letting it die. Many rang the death knell for the reform effort after Democrats lost their supermajority of 60 votes in the Senate when a Republican won a  special election in liberal Massachusetts.

With an anti-Washington mood sweeping the country, both political parties are maneuvering to keep their base supporters energized. Letting healthcare reform die after so many decades of fighting for it,  no doubt would have been too big of a letdown for Democrats who saw a light at the end of the tunnel this time around.

Democrats are planning to use a budget process called “reconciliation” to push the legislation to final passage. It is a two step process under which the House would pass the Senate bill. Then changes in the Senate bill sought by the House would be passed using the reconciliation process which allows a simple majority vote in the Senate rather than the 60 needed to clear Republican procedural hurdles.

Senate Republican Leader Mitch McConnell has vowed to make the November election a referendum on healthcare, citing polling data that shows the public is wary of the sweeping changes to the $2.5 trillion U.S. healthcare system that Democrats are proposing. Democrats believe that they can sell their bill to the public once it passes. In a few short months we will know who wins that debate.

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Photo Credit: Reuters/Kevin Lamarque (President Barack Obama speaks about healthcare reform as medical professionals look on)

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