Insurer stocks continue to fall after ruling
LOS ANGELES (MarketWatch) -- In the wake of a landmark Supreme Court ruling that reverberated throughout the sector, commercial insurers started sliding again in Friday trading despite a broad market rally.
These insurers, which had stumbled from the shock of the court's decision Thursday to uphold President Barack Obama's health-care overhaul legislation, rebounded when trading opened. But as the session wore on, they slid into negative territory.
It appears investors are concerned about some of the provisions in the bill, formally known as the Affordable Care Act, including new fees as well as the requirement that insurers spend at least 80% of their revenue on providing health care.
The high court ruled 5-4 on Thursday that a requirement for all U.S. citizens to purchase health insurance or pay a penalty was constitutional as a tax. The court also ruled that the federal government could expand its Medicaid program but couldn't coerce states into it by threatening to withhold existing funds if they failed to participate in the expansion.
Medicaid insurers, which got a shot in the arm from Thursday's ruling, were mixed in trading on Friday.
Hospitals continued their surge Friday, as industry leader
Other parts of the sector followed the rest of the market in its rally. Medical-device makers posted gains of 2% or more with
Drug distributors also were up, as well as technology specialists serving the medical profession.
Meanwhile, online health-insurance broker
Schindler was concerned the individual mandate that required policy purchases was in doubt. He said the mandate and subsidies offered in the legislation officially known as the Affordable Care Act would more than double eHealth's market opportunity in two years.
"EHealth's primary business is selling individual and family plan insurance policies to an address market of 19 million," Schindler wrote in a note to clients. "With more than 715,000 current members, eHealth has only about 4% market penetration. Since the individual mandate of the ACA is approved, the Congressional Budget Office estimates 30 million additional individuals will be added to the individual and family plan insurance market."