NEW YORK - Shares of U.S. health insurers climbed on Thursday as analysts said President Barack Obama's highly anticipated speech urging Congress to act on health reform revealed no game changers.
Analysts also deemed the possibility of a public plan that would seriously undermine the companies as unlikely following the speech.
Obama called for quick action on a broad healthcare overhaul in his primetime address on Wednesday night [ID:nLA571405], but the speech contained nothing unexpected, said Steve Shubitz, an analyst with Edward Jones.
There wasn't anything said that is drastically changing the outlook as to what might come out of Congress, Shubitz said.
The prospect of dramatic overhaul of the healthcare system has pressured health insurer shares throughout the year.
Shares of UnitedHealth Group (UNH.N) and WellPoint Inc (WLP.N), the two largest health insurers each edged up less than 1 percent in morning trading. Other insurers rose more sharply, with Aetna (AET.N) up more than 1 percent and Cigna Corp (CI.N) rising more than 3 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.
Shubitz said the plan resembled the framework proposed earlier this week by Senator Max Baucus, head of the powerful finance committee, indicating that Baucus' formal bill will be crucial for investors to watch.
It's very clear that this is the route they're going to use to get something out there, Shubitz said.
Obama made his case for a public health plan that he said would lead to more competition in the private market. The controversial public plan idea has prompted fear from investors that companies would be unable to compete against it and eventually beget a government takeover of healthcare.
Obama said he had no interest in putting insurance companies out of business and would remain open to other ideas that ensure Americans have an option to secure affordable coverage.
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.
Analysts noted that Obama remained open to other ideas aside from the plan, such as non-profit cooperatives that are seen as less threatening to the industry.
While we understand the negotiating logic of keeping it on the table for now, we still don't see any higher/better odds that a full fledged public plan can ever make it into a final piece of legislation, JP Morgan analyst John Rex said in a research note.
(Reporting by Lewis Krauskopf; additional reporting by Susan Heavey in Washington)