The S&P Health Care Index has been seeing a boost from the health care bill. Will the stocks continue to get a lift from the new legislation—and how should you play the sector? Ipsita Smolinski, president and health care analyst at Capitol Street, and Carl McDonald, health care analyst and managed care analyst at Oppenheimer, discussed their views.
“This bill is not catastrophic for health insurers, but it is by no means good,” McDonald told CNBC.
“There is certain clarity as to what’s in the bill, but we’re just trading that clarity for a lot of uncertainty about what these companies are going to earn in 2014 and beyond.”
The bill has been criticized as an "enabling legislation," which means “it’s not spelled out and up to the administration to figure out how to implement it." As a result, McDonald said, many of the individual markets in the U.S. are going to be "destroyed."
“I don’t think any of these companies are going to be able to earn any margin in that product because of all the adverse selection mainly because of the fact that there’s a very weak individual mandate," he commented.
Smolinski agreed and said the individual and small-group markets are going to be the worst off.
“The devil will be in the details,” she said. “It’s going to be a lot of uncertainty. Even though we have clarity in the bill, there’s going to be uncertainty from the administration for sure.”
However, Smolinski said pharmas and hospitals are the biggest winners from the health care bill.
“Within the health insurance group, the Medicaid plans are the biggest winners. And the Medicare advantage plans are the biggest losers within managed care,” she added.
McDonald Likes:
WellPoint
Humana
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More Market Point/Counterpoint:
- Uri Landesman: Markets to Dip, Rise—Here's What to Buy
- Analysis: These Stocks Will Ride Health Care Bill
- Forget Health Care Bill — Markets Are 'Sell-Sell' Anyway
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CNBC Data Pages:
- Dow 30 Stocks—In Real Time
- Track the DJ Health Care Index Here
- Where's the US Dollar Today?
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CNBC Slideshows:
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Other Health Insurers:
Cigna
UnitedHealth
Aetna
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Disclosures:
No immediate information was available for McDonald or Smolinski.
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