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On Day 1 of open enrollment, insurance stocks jump

By Beth Kutscher
Posted: October 1, 2013 - 2:45 pm ET

As Americans across the country began signing up on Tuesday for health coverage through state- and federally operated insurance exchanges, health insurance company stock prices reflected optimism about the impact of the healthcare reform law's extension of coverage to millions of uninsured people.

The market bump is a reversal from last year when commercial insurers took big hits to their share prices after the U.S. Supreme Court upheld the key elements of the Patient Protection and Affordable Care Act. Payer stocks suffered again after President Barack Obama was re-elected.

On the first day of open enrollment—despite heavy traffic that temporarily shut down enrollment websites in at least a dozen states—WellPoint closed with a gain of 2.6%, Cigna, 1.9% and Humana, 2.2%, outperforming the broader market.

“I think it's definitely the result of the markets coming online,” said Vishnu Lekraj, an analyst at Morningstar, who added that the rollout hasn't experienced any major issues.

Both commercial insurers and Medicaid managed-care organizations saw the same boost from investors.

Shares of Health Net jumped 3.2%, and WellCare Health Plans closed with a gain of 3.5%.

The optimism also seemed to reflect confidence from investors that Obama and Senate Democrats will stand their ground despite pressure from House Republicans to delay for one year the Affordable Care Act's requirement that nearly all Americans obtain health insurance in 2014. The impasse has already led to the first government shutdown in 17 years.

The health insurance industry supported the Affordable Care Act and its various insurance market rules on the condition that everyone has to obtain coverage, so insurers could be sure that they would get a good balance of healthy and sicker subscribers.

“It's mostly political dithering,” Lekraj said. “You need to have the individual mandate in place or else you've got adverse selection. I don't see anyone giving up any ground to the other side, and I think investors have priced that in.”

Follow Beth Kutscher on Twitter: @MHbkutscher

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