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It's always good news for insurers

Many of you will remember that insurance stocks skyrocketed when the Senate passed the health-care reform bill, confirming many liberal's suspicions that the bill was a massive giveaway to insurers. Now those same stocks are skyrocketing on news that Senate Democrats might lose their 60th vote, potentially dooming the health-care bill.

The stock market hit a new 15-month high Tuesday, spurred by the biggest jump in health-care shares since the summer as traders bet on the outcome of a Senate race with big implications for proposed health-insurance reforms.[...]

The rally in health-care stocks came as voters headed to the ballot box in a surprisingly tight special election in Massachusetts to replace the late Edward Kennedy, with polls still open as of the market's closing bell. Democrats would lose their filibuster-proof 60-seat majority in the U.S. Senate if Republican candidate Scott Brown wins.

This is not the first time I've wished that the market could explain itself.

By Ezra Klein  |  January 19, 2010; 5:10 PM ET
Categories:  Health Reform  
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Comments

this is idiotic speculation. Insurers have about 2-3% profit margins and the prospects don't seem to be positive. Sure they're not being put out of business but its not as if they're the pharmaceutical industry making money hand over fist with 20% profit margins.

The problem I have with these posts is that you never speak up when insurers stocks go down like Aetna did last week for example. I'd give you more credit if you did.

Posted by: visionbrkr | January 19, 2010 5:19 PM | Report abuse

not so complicated actually-

first boost was because the bill looked better for health-related stocks than was expected. today's boost is because of the possibility that reform fails altogether.

market initally assumed major healthcare reform (negative price effect) and has slowly adjusted its expectations back to a no-reform environment (and pricing).

Posted by: rt72 | January 19, 2010 5:32 PM | Report abuse

These political considerations do affect intraday price swings in the health insurers, you know how I know? I watched Larry Kudlow become almost orgasmic about it this morning on CNBC!! :)

Posted by: zeppelin003 | January 19, 2010 5:34 PM | Report abuse

This is a bit of meme, Ezra.

A. No Healthcare Bill = Really Great For Big Health

B. Senate Healthcare Bill = Really Good For Big Health

C. Single Payer = Really Bad For Big Health

You're creating you're meme around the notion that A is 100 on the 1-100 scale and B is 1. It isn't the case.

C, or something along those lines, is 1.

B probably is in the 90s for Healthcare, no worse than in the 80s. It's something they very much could live with: it's why they *wrote* the thing and have worked to get every give back out of it they could.

Big Health wants B to fail not because they feat that something in the range of a 50 will pop up. They want it to fail because they're completely greedy and want everything.

The Senate Bill is their *fallback* position, which has been crafted to be very good for them. Most of the things that could have been a risk to them have been watered down or killed off. And they know all of the avenues of attack over the coming years to prevent it from being strengthened.

Look at what we've done for the Banks: it's been a boom for them, and literally saved them from death. But they fight against even reasonable things like limiting bonuses or enacting simple laws to prevent another crisis and the potential for the banks to die next time around.

Why?

Because even through they made out like bandits, they want it all. "Good" isn't good enough.

Put away the meme that because Big Health would prefer that the entire healthcare bill would die that it's Proof! that any other healthcare bill would be Bad! for Big Health. You're smart enough to know they've gamed the system entirely so that it's Win-Win for them. The only question is whether they win 70-0 (healthcare dies) or 45-6 (the senate bill passes).

And I don't think I'm exagerating with the scores that. Our one "touchdown" is Coverage. I leave off the extra point because it's not Full Coverage, and very easily could have left it at 3 (a FG) because the subsidies in the Senate bill are weak. But the other bones you want to raise up the flag poll have all be watered down to the point that they aren't even scores. They simple are possessions where we moved the ball down the field before fumbling or punting.

Something to build on later? Your great hope. It may be misplaced given the ease of this process being derailed.

John

Posted by: toshiaki | January 19, 2010 5:45 PM | Report abuse

Ezra- I've tried to explain my view on this before. It's all about expectations: No bill is better than any bill for insurers (Any Dem writeen reform bill is bad for insurers). Senate bill is better than House bill (but worse than status quo). But you also must realize where the health insurer stocks are now. They trade at 11x this year's earnings. Long term avergae is 14x. Still trading well below the average.

Policy bloggers should pay more attention to the market. It's usually telling you something....

Posted by: MBP2 | January 19, 2010 6:29 PM | Report abuse

Also health insurers were down by 55% in 2008.

Posted by: MBP2 | January 19, 2010 6:30 PM | Report abuse

You guys are missing the point. Who cares if the insurance sector makes a profit margin of 0.1% or 50%. Its purely wasted money.

Pharmaceutical companies provide a valuable product. Doctors provide a valuable service. Hospitals provide a valuable service.

Insurers provide.....ummmm..... nothing. They put their hands in other people's pockets and serve as inefficient middle man with their hand out for the taking.

Posted by: platon201 | January 19, 2010 6:38 PM | Report abuse

Perhaps you should stop trying to align short term variations in the market with whatever was in the news today. Then you won't be so puzzled.

After all, you don't have any evidence for it anyway so just accept it for what it is -- a random number generator.

Posted by: pj_camp | January 19, 2010 8:04 PM | Report abuse

platon201,

its a shame that people like you who have zero idea what you're talking about are given voice through a computer to post on here. You do realize that the ONLY time costs have been controlled in healthcare in either the private or public sectors was in the 1990's in the era of Managed care, right? Does that matter? Insurers while you despise them have put plenty of cost containment features in their plans in attempts to make their plans more affordable and to enhance the lives of their clients. Those include disease management programs, wellness programs, healthy maternity programs etc.


I could list those points more but I won't waste my time. I will instead point to the tens of billions of dollars wasted per year in Medicare and Medicaid fraud and ask you if that is a system you'd prefer and if so, WHY? With zero accountability that syphons money from the taxpayer even moreso than happens now with no end in sight.

If this reform happened and restricted insurers even more than they are now (already one of if not the most highly regulated industries), if it resticted their small profit margins even more and if it ended pre-ex would it be enough for you? Who would be your bogeyman then?

Posted by: visionbrkr | January 19, 2010 11:02 PM | Report abuse

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