Insurance stocks dive with reform ruling

Health insurance companies' stocks initially dove after the Supreme Court ruled the reform law constitutional and then rebounded shortly thereafter.

The stock market showed its displeasure initially after the ruling, but most insurer stocks rebounded after it became clearer that the decision generally favors health insurers, which stand to gain almost 20 million new members and a $778 billion increase in revenue in the next 10 years, reported The Washington Post.

However, after initially bouncing back, insurers' stocks again fell, with UnitedHealth, WellPoint, Aetna, Health Net and Coventry dropping 2 percentage points or more. Medicaid insurers saw a mix, with Amerigroup and Molina Healthcare increasing slightly, while WellCare and Centene each were off by about 2 percent, Market Watch reported.

Analysts, meanwhile, remain generally optimistic for insurers' financial future. Deutsche Bank's views on the insurance industry remain stable. Although analyst Scott Fidel said the ruling is a "slight negative" for insurers, "we have a positive overall view," he wrote in a note after the Supreme Court ruling. He recommended investors buy UnitedHealth and Cigna on the weakness, according to The Wall Street Journal.

Standard & Poor's Capital IQ also maintained a positive rating for insurers, expecting the increased enrollment to outweigh other financial burdens. Stifel Nicolaus favors insurers that already have scale and exposure to income from Medicaid, such as WellPoint.

To learn more:
- read the Washington Post article
- see the Market Watch article
- check out the Wall Street Journal article (subscription required)

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