Payer stock prices rise after reinstatement announcement

Stock prices of leading insurers climbed after President Barack Obama allowed a short-term reinstatement--subject to state insurance commissioners' approval--of canceled individual market plans that fail to meet Affordable Care Act requirements: Aetna shares jumped 1.74 percent Thursday, Wellpoint was up 1.67 percent, WellCare Health shares jumped nearly 3 percent and UnitedHealth Group was up 0.4 percent, CBS News reported.

These gains align with third-quarter earnings growth for Cigna, Humana and Health Net, according to investment research firm Zacks Investment Research, suggesting the industry is thriving in a perfect storm.

Besides healthcare reform, payers faced waves of challenges this year including stiff competition, demands of a new and better-informed customer mix and uncertain financial conditions at home and abroad, Zacks noted. Though lower-than-expected utilization boosted 2013 profitability, the investment research firm expects margins to fall next year as medical costs progress to the mean.

Stock prices notwithstanding, news that canceled plans could be reinstated drew cautionary words from Karen Ignani, CEO of America's Health Insurance Plans, who said changing healthcare reform rules in midstream may disrupt the market and raise premiums.

Moreover, insurers may not apply to re-offer canceled plans since reinstatement is temporary and canceled policies represent only a fraction of the overall market, CBS noted.

And if healthy people keep their old, cheaper coverage, then sickly Americans may dominate the marketplace. This may make exchange products less profitable for insurers, Sarah James, a healthcare analyst at Wedbush Securities, told CBS.

Overall, the market for health insurance stocks may stay volatile while key details about Affordable Care Act implementation remain unknown, James said. And political controversy about the law remains so heated that anything could happen, CBS reported.

For more:
- here's the Zacks Investment Research announcement
- read the CBS News report (video included)

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