Regardless of how you feel about a public health insurance option offered by the government, interest at the policy level seems to be waning recently. If Democrats drop the idea of a public option as a component of health care reform, health insurance companies could benefit. The way I see it, if the government starts offering health insurance as a public provider then new supply will have entered the market. According to my college Econ 101 text book, that new supply would have shifted the supply and demand curves towards lower prices and maybe lower profits.
That may be good for consumers but might not be so hot for insurance companies. For example, AFLAC, Incorporated (NYSE: AFL), a supplemental health and life insurance company, has been on a pretty good run over the last 6 months, but it is currently bumping up against long term resistance (learn more about identifying support and resistance levels here.) A new glut of supply injected by the government could have been just the trigger needed to drive stocks like this back down.
If health care reform is trimmed, or defeated altogether, those of us pulling for it may have to drown our sorrows in potential profits from rising insurance company stocks. Either way the next several weeks should give us a good idea about where the future of health insurance is headed and whether these stocks are going to become dogs or darlings.
John Jagerson is a co-founder of Learning Markets, LLC. Learning Markets offers daily articles, videos and investing guides about everything from investing in stocks and options to trading currencies in the forex market and more.
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Reader Comments (Page 1 of 1)
8-21-2009 @ 10:42AM
hardcoreicemoth said...
This was a very interesting article. I really enjoyed reading it. Good insight to the current health care reform.
10-04-2009 @ 2:32PM
mmarida said...
Great posts, but all I would like to see is affordable Health Insurance for anyone that needs it. Why not look at what other countries are doing? .....Canada?
In the mean time I found a good selection of rates and plans at https://www.insurewish.com/