Health Benefit Providers Index Drops 14% on Reform Concerns

The accompanying table includes 38 companies in the ETF Innovators Health Benefit Providers Index, which was down sharply last week and has lost 14% of its market value to a level of $192,305 since I last wrote about the group five weeks ago.

The uncertain future for health insurers and benefit providers that I wrote about previously came to a head this week with plans by President Obama for healthcare reform aimed at cutting health costs by favoring generic drug makers and smaller Medicare Advantage payments to private insurers, along with smaller increases in Medicare Advantage reimbursement for 2010 than was expected.

Stocks in the Health Benefit Provider Index which posted major losses in the past month include:

1.) UnitedHealth Group (UNH) -32%

2.) Aflac (AFL) -24%

3.) WellCare Health Plans (WCG) -38%

4.) Humana (HUM) -39%

5.) Universal American (UAM) -34%

6.) Aetna (AET) -24%

Only four companies in the index managed to post a stock price gain in the past year, including PharMerica (PMC), Omnicare (OCR), Amerisafe (AMSF), and America Service Group (ASGR). The group of gainers carried a common theme of providing specialized health benefit services, including PMC - an operator of hospital pharmacies, OCR - pharmacy services and distribution for long-term care facilities, AMSF - workers compensation insurance, and ASGR - managed healthcare services for correctional facilities.

Express Scripts (ESRX) and MedcoHealth Solutions (MHS) are two pharmacy benefit managers which are poised to gain on the prospects for bio-generics and other provisions designed to encourage the use of generic medications, which results in higher profit margins for these companies.