Wall Street sees few surprises in Obama speech

By Lewis Krauskopf and Susan Heavey

NEW YORK/WASHINGTON (Reuters) - Shares of U.S. health insurers climbed on Thursday after analysts saw no "game changers" from President Barack Obama's highly anticipated speech on health reform.

Following the speech, analysts predicted any changes to the system would be moderate, with Obama backing many initiatives put forth earlier this week by a leading Senate committee. The possibility a threatening public health plan would be enacted also now seemed doubtful, analysts said.

"There wasn't anything said that is drastically changing the outlook as to what might come out of Congress," said Steve Shubitz, an analyst with Edward Jones.

Democratic leaders promised swift action on healthcare reform after Obama called for quick action on a broad overhaul in his prime-time address on Wednesday night.

The prospect of dramatic changes to the healthcare system has pressured health insurer shares since Obama took office in January and made reforming the nation's healthcare system and expanding coverage to the uninsured a top goal.

Shares of UnitedHealth Group (UNH.N) and WellPoint Inc (WLP.N), the two largest health insurers, rose about 1 percent and 2 percent, respectively. Aetna Inc (AET.N) rose more than 2 percent and Cigna Corp (CI.N) jumped more than 4 percent.

Obama "demonized insurers several times but didn't add anything new to the debate," Wells Fargo analyst Matt Perry said in a research note. "Overall we view the speech as neutral to insurers."

Obama made his case that a public health plan would force more competition in the private market. The idea has prompted worries from investors that companies would be unable to compete and could eventually lead to a government takeover of healthcare.

But Obama said he had "no interest in putting insurance companies out of business" and was open to other ideas to ensure Americans have affordable insurance options.

Concern remains over the possibility of a public insurance option and how alternatives that could be less threatening, such as non-profit cooperatives, would operate. But there is a growing sense that the government's role may not be as big as once feared.

Investors "are probably most concerned about how strong a government-run option to compete with commercial health insurers might be in a final bill, and ... Obama signaled yet again that he recognizes there's going to have to be compromise," said Paul Heldman, a senior healthcare policy analyst at Potomac Research Group in Washington.

Ana Gupte, a Sanford Bernstein analyst, said in a research note she was "even more confident after the Obama speech that the legislative outcomes will be moderate with no threat of a Medicare-like public plan."

Overall, analysts said, Obama took a more moderate approach, with his plan resembling the framework proposed earlier this week by Senator Max Baucus, head of the powerful finance committee whose formal bill will be crucial for investors to watch when it is released.

"It's very clear that this is the route they're going to use to get something out there," Shubitz said.

Ipsita Smolinski, a healthcare analyst with Washington-based Capitol Street, said the focus on the Baucus bill helps give the market a sense of the road ahead.