December 21, 2009 / 3:40 PM / 8 years ago

Healthcare shares rise as US reform bill progresses

* Health insurers, pharmacy benefit manager stocks rise

* Investors welcome revised healthcare reform bill

BOSTON, Dec 21 (Reuters) - Healthcare shares rose on Monday as a bill to reform healthcare passed the first critical test in the U.S. Senate, putting it on track to be passed by Christmas and easing uncertainty over the impact on health-related stocks.

Health insurers did particularly well.

The bill would require most Americans to have insurance, expanding the membership rolls for health insurers, and replaces a proposed government-run public insurance option with exchanges to cover those who are not covered through their employment.

“All in all, relative to the last version of health reform issued by the Senate, things have turned out pretty well for the health insurance industry,” said Carl McDonald, an analyst at Oppenheimer. “In particular, all versions of a government-run health plan have largely been eliminated.”

In addition, the proposed $6.7 billion industry tax has been pushed back a year until 2011, which will give insurers enough time to factor it into pricing, he said.

Matthew Borsch, an analyst at Goldman Sachs & Co., said Cigna Corp (CI.N) remains his favorite among health insurers.

    “Aside from reform, the important backdrop to our sector view is fundamentals, which are decidedly mixed but with the key being that downside risk to commercial margins is mitigated by firming of industry pricing,” he said in a research note.

    Shares of Cigna rose 5.3 percent to $37.69. Shares of Aetna Inc (AET.N) rose 5.84 percent to $34.41. Humana Inc (HUM.N) rose 3.79 percent to $45.17 and United Health Group Inc (UNH.N) rose 5 percent to $33.14

    Shares of pharmacy benefit managers Medco Health Solutions Inc MHS.N rose 3.84 percent to $65.51 and Express Scripts (ESRX.O) rose 5.2 percent to $88.77 as concern eased that an industry tax could be added to the bill in the final days leading up to the vote.

    “Based on discussions with our political consultant in Washington, we believe that a PBM tax is now not part of the final Senate bill,” said Steven Valiquette, an analyst at UBS Securities. “Thus, PBM stocks are likely to rebound.”

    Reporting by Toni Clarke, editing by Dave Zimmerman

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