UnitedHealth Group, Inc. (NYSE: UNH) and most healthcare related insurers are trading higher today despite the coming health-insurance reform.  The Senate voted over the weekend to open a debate on its version, or versions, of a healthcare reform bill.  While this is aimed at getting insurance to 31 million people, even the executives of the large insurers do not exactly know what the impact will be.  And if they do know, they are not saying anything to their employees and partners.  The public option is still an unresolved issue.  These stocks are all higher, but the real amazement is that most of these stocks are actually all trading up close to 52-week highs.

WellPoint Inc. (NYSE: WLP) is up over 4% at $54.47 (52-week high is $55.72) and CIGNA Corp. (NYSE: CI) is up almost 7% at $32.13 (52-week high is $33.00) after J.P.Morgan raised their ratings to Overweight.

Humana Inc. (NYSE: HUM) is up right at 3% at $41.65 (52-week high is $$46.01 )and Aetna Inc. (NYSE: AET) is up 3.4% at $29.37 (52-week high is $34.87).  UnitedHealth Group, Inc. (NYSE: UNH), the largest by market cap, is up 2% at $29.13 (52-week high is $30.25).

While not every one can claim this, these stocks also look higher than after the election aftermath and higher than the early Fall 2008 financial meltdown levels.

There is an interesting take here.  The large insurers will survive.  Even if their forward medical loss ratios are mandated to be higher and even if they are forced to make earnings at the same rates of regulated utilities, the stock market is at least telling you that these will survive and thrive.

The focus here is on the largest healthcare insurers.  The smaller insurers face much more uncertainty because the forced action of no pre-existing conditions as a huge business risk.  An influx of a few hundred hemophiliacs and cancer patients won’t wipe out these giants, but that number could crush a smaller insurer.

If you ask any employee of any insurance company today, they are probably just as baffled about the rally in share prices as many market observers.   As a reminder, this is health insurance reform.  Attacking only the insurance side of the equation (this cycle anyway) was a missed opportunity, but so far it seems that the health insurers as a stock sector are going to thrive.

JON C. OGG

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