Health Insurers Headed Lower?

Health insurers fell sharply last week on news that during June, unemployment rose to 9.5%. The stocks also may be reflecting growing pessimism among investors that the Democrats' public option heath plan may still get a weak new lease on life.

It's hard to sell health insurance when unemployment is rising, and when insurance markets weaken, price wars among insurers often break out, although they don't seem to be a big problem yet.

More importantly, if the public option, or Government HMO, makes it through Congress, no matter how much it's watered down, it will hurt the health insurers. Last week the GHMO looked dead on arrival. Democrats are talking tough, but only time will tell.

Polls are showing a lot of concerns about the public option, and there are reports that it only has 38 votes in the Senate.

Finally, with most charts for the major indexes looking weak for the near term, health insurers may just be under pressure from profit taking after staging strong rallies since early March.

Here are the daily charts with prices as of July 3 for AET, CI, CVH, HS, HUM, UNH, WLP, XLV, VHT.

Disclosure: I don't have positions in any of these stocks or ETFs.