Tuesday October 27, 08:29 PM
HMO stocks rally on doubts public plan can pass
NEW YORK, Oct 27 (Reuters) - Health insurer stocks rallied on Tuesday on skepticism that a government-run plan seen as detrimental to the industry would win passage, analysts said.
The stocks had slid on Monday, when Democratic leader Harry Reid said the U.S. Senate's healthcare overhaul would include a government-run insurance plan that would vie with the companies in the private marketplace.
But there are doubts Reid has enough votes to support the proposal, analysts and fund managers said on Tuesday. That perception gained steam when Sen. Joseph Lieberman, an independent who caucuses with the majority Democratic party, said on Tuesday he opposes the public plan option.
'You've had some commentary come out today that showed it's not likely it's going to work. That's why some of the more sensitive areas in that space are seeing a real big move today,' said David Heupel, a portfolio manager with Thrivent Investment Management.
'It's great for him (Reid) to say it includes it, but he doesn't have the votes,' Heupel said. 'So it's a somewhat of a moot point to me.'
The S&P Managed Health Care index of large U.S. health insurers rose 4.5 percent in afternoon trading, amid a slight decline for the broader market and following a 2.5 percent drop for the index on Monday.
Coventry Health Care Inc (NYSE: CVH - news) jumped 9.1 percent, UnitedHealth Group (NYSE: UNH - news) rose 5.4 percent and Cigna Corp (NYSE: CI - news) increased 4.9 percent.
'The realization that Reid may not have the necessary votes and it was more of a political move than anything, and then Lieberman coming out and saying he would absolutely vote against it, I think is perhaps supporting these stocks today,' Stifel Nicolaus analyst Thomas Carroll said.
Supporters see a government-run plan as a way to boost competition in the insurance market and drive down costs. But investors worry health insurance companies would not be able to compete on a level playing field against a government plan, and that it could be the first step to eliminating insurers as part of the health system.
(Reporting by Lewis Krauskopf; Additional reporting by John Whitesides in Washington; Editing by Gary Hill) Keywords: HEALTHINSURERS/
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