Health Stocks Open Higher After Obamacare Passes

Monday, 22 Mar 2010 11:20 AM

 

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The final passage of a landmark healthcare overhaul brought relief for investors on Monday, sending shares of insurers and hospital companies higher after a year of volatile trading on concerns over the burdens from reform.

The S&P Health Care Sector index opened about 0.8 percent higher, outpacing the broader market, after the House of Representatives gave final approval to a sweeping overhaul late on Sunday night.

Shares of hospital companies such as Community Health Systems and health insurers such as Amerigroup that focus on Medicaid plans for the poor led the increases. Analysts expect those companies to benefit as the reform package extends coverage to 32 million Americans.

"We continue to believe money will rotate back into healthcare stocks now that the uncertainty of 'reform' is lifted," Citigroup analyst Charles Boorady said in a research note.

The overhaul will also expand the Medicaid government health plan for the poor and bar insurance practices such as refusing to cover people with pre-existing medical conditions.

Shares of health insurers — the main political targets during the reform debate — built upon a rally from the end of last week. Investors were heartened that the uncertainty was cleared from the market and that sector companies avoided a worst-case scenario, such as the creation of a government-run competitor.

The Morgan Stanley Healthcare Payor index rose 1.9 percent. Large insurers WellPoint Inc. and UnitedHealth Group rose less than 1 percent. Medicaid-focused insurers such as Amerigroup and Molina Healthcare climbed more sharply, as the companies stand to benefit from an expansion of the program.

Shares of hospital companies Community Health Systems and Tenet Healthcare rose 4 percent and 6 percent, respectively. The overhaul has been seen as helping hospital companies by adding more insured customers.

The NYSE Arca Pharmaceutical index rose 0.4 percent, with Pfizer Inc. and Merck each increasing more than 1 percent each. Drug companies face new fees but wider insurance coverage could help offset the costs by delivering new customers.

The S&P Health Care Equipment Sub-Industry index of medical device companies rose 1.4 percent. Such companies, including Medtronic and Boston Scientific face an industry tax, but it was cut in half to $20 billion and will not start until 2013.

© 2014 Thomson/Reuters. All rights reserved.

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