HMOs at New Highs as Severability Debate Continues

Doctor talking to female patient in office
Jamie Grill | Iconica | Getty Images
Doctor talking to female patient in office

HMO stocks are strong today after three days of hearings on the constitutionality of President Obama's healthcare plan in the Supreme Court.

The debate centers around severability: specifically, will the Justices sever the individual mandate that requires everyone to buy insurance from the rest of the legislation?

This would be the worst case scenario: insurers would have 30 million less people on the rolls, and still be required to implement the more onerous provisions like the requirement to provide insurance for anyone with a pre-existing condition.

But many now believe that severability is less likely, that the law will be voted up in its entirety — which would enroll millions of new people on the HMO docks — or thrown out in its entirety, essentially throwing out the good and bad together.

The argument against severability is a simple one: the Justices are unlikely to go through 2,700 pages of law and decide which parts should be kept and which parts should not; it's simply too complicated. Justice Scalia summarized the dilemma when he said, "Can you take out the heart of the Act and leave everything else in place?"

Don't get too excited — this is really too close to call, so HMOs are going to be in limbo until June when a decision is expected.

HMO Components: Highest Since: (based on last sale)

UnitedHealth Dec 31, 2007 (> 4 year high)

Aetna March 5, 2008 (4 year high)

Coventry July 28, 2011 (8 month high)

Cigna July 29, 2011 (8 month high)

Bookmark CNBC Data Pages:


Want updates whenever a Trader Talk blog is filed? Follow me on Twitter:

Questions? Comments?