Power And Dollar

Are These Obama Health Insurance Stocks’ Price Level Sustainable?

Shortly after Obama’s health care reform announcement on 2010.02.22 M, the health care industry stocks started to fall.  Even at closing, google still shows they are down.  However, health care insurance sector, such as Cigna (NYSE: CI http://www.cigna.com) and Aetna (NYSE: AET http://www.aetna.com), recovered very quickly and in factor closes better than yesterday 2010.02.19 F.  Who got the short straw in this latest round of Obamacare drama?  Why?  Didn’t Obama say job is his number one priority in the State of the Union?  Is this some kind of ideological fixation he has? 

If you need more information than CNN gives, then try this summary page.

The google health care index is down because the drug companies’, such as Merck (NYSE:MRK http://http://www.merck.com) and Johnson & Johnson (NYSE:JNJ http://www.jnj.com), stocks are falling.  Obama’s donut-hole fix will affect these drug companies’ financial performance.  On top of that, a lot of their patents are expiring. 

Health insurance companies are doing well because this round of reform is perceived to be creating demand for them.  Anti-discrimination is written in the announcement.  However, it is to “prohibit pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals” (the CNN does not say this.  You have to look it up from the summary link above).  In terms of “pre-existing condition”, that can translate to underwriting, i.e. if an applicant has to be accepted or not.  What it does not say is this: can the pricing of the same product be different to different individuals based on pre-existing condition?  Or based on zip code?  Based on county?  Based on race?  Which health condition is race related have you heard of lately?  Some explanation about “discrimination in favor of highly compensated individuals” is obviously needed. 

Obama knows health care reform did not work in the legislature.  He more likely than not knows his magic does not work on the Republican senators.  Does he believe his proposal will get some moderate Republicans?  If he wants to work getting moderate Republicans, then he would be work on them individually behind closed door.  And we will end up seeing a big announcement with some of these congressmen.  Instead, we see Obama’s proposal.  So, this is HIS proposal.  The other guys are missing.  So, he is making a political move to show to the electorate he has done his homework and tries to paint that the other guys are the real road blocks. 

Yes, they are.  And we have known it for a quite while.  And in fact, they have been encouraged by the voters to be road blocks.  Therefore, Obama better have planned a second move after Republicans’ predicted uncooperative stand.  If you truly believe that the Republican road blocks will not make Obama’s proposal work, then you should ask if these price levels sustain.

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February 22, 2010 Posted by | Current Events, Election 2010, health care reform, obama, politics, US politics, wordpress-political-blogs | 1 Comment