Insurers vulnerable if ObamaCare is struck down

If Obamacare passes and everyone is required to have some form of health care, then there is guaranteed business for heath insurance providers such as Aetna, Humana and WellPoint. However, if the bill is struck down and citizens are not required to have heathcare, then business is not guaranteed and insurance companies may be vulnerable.

By Thomas H. Kee Jr.
March 26, 2012, 3:11 p.m. EDT
Market Watch

Some people compare ObamaCare's requirement to buy health care insurance to the DMV's requirement to buy car insurance, but there is a major difference between the two that makes them incomparable.

Driving a car is a privilege, but living your life is a right. Constitutionally, we cannot force anyone to live their life a certain way, so I do not see how the Supreme Court could rationally determine the mandate for US citizens to buy health care Constitutional.

Now, although it is not something that can be forced, it brings to the table something that is much more serious. First, we know everyone should have health care, but they do not. More importantly though, with the aging population and the bankrupt Social Security and Medicare systems, we know that the lack of health-care insurance in this country will one day either force us to offer free health care in some way, or dive so seriously into debt that the United States makes Greece look like a responsible nation.

Obviously, any health insurance provider should support this requirement, but they are bias because they will make more money from it, and virtually guarantee the industry of a steady, sure stream of income not unlike what auto insurers can be virtually guaranteed of today. As a whole, if everyone was required to have health care, the health insurance industry would be as sure as death and taxes.

Companies like Aetna AET -1.45% , WellPoint WLP +1.67% , and Humana HUM +0.28% would almost surely benefit in the long run from such a mandate, and therefore be the most vulnerable if the Supreme Court shoots it down too, but these companies trade at low PE multiples already, so the case for shorting them may be less fruitful. Instead, for anyone who believes that this part of the bill gets shot down, UltraShort Health Care RXD +1.05% (ultra short health care) may be a good option.

In either instance, and regardless of what the Supreme Court says, the heavy burden of Social Security and Medicare is not going away, and I believe this Supreme Court debate will eventually bring that to the table again. What is the United States going to do about this massive problem?

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