March 22, 2010 08:45 ET

U.S. Health Care Stocks Poised to Sink on Monday Following Historic Congress Vote

LAS VEGAS, NEVADA--(Marketwire - March 22, 2010) - Top Health Care Stocks: Aetna, Inc. (AET) up 3.67% to $34.46, WellPoint, Inc. (WLP) up 1.96% to $65.07, Unitedhealth Group, Inc. (UNH) up 2.38% to $34.39 and Cigna Corp. (CI) up 3.46% to $37.08 all of which posted gains at the end of Friday's session are expected to sharply decline on Monday following a successful Health Care vote.

Late Sunday night the U.S. House of Representatives led by the jubilant Speaker Rep. Nancy Pelosi (D-CA) passed a historic Health Care Bill, possibly starting the U.S. on a long path which may culminate in the eventual establishment of a British or Canadian style Health Care System. As of Monday the Health Care Insurers will become in effect, like utilities, members of a regulated industry. In an interview with ABC News Senior White House Correspondent Jake Tapper, Vice President Joe Biden summed up one of the goals of the controversial legislation by saying " We're going to control the Insurance Companies."

Initially the Health Insurance companies will have to absorb the cost of enrolling millions of the uninsured. Higher taxes which will cover the increased cost of insuring each and every American will not begin to kick in until 2011. As the new system becomes fully operational the U.S. Government will hire an estimated 17,000 new IRS agents tasked with enforcing the new regulations and in effect becoming collection agents working on behalf of the Insurance Companies.

While the insurers no doubt like the provision of mandatory enrollment backed by IRS enforcement, the reality of direct government involvement and regulation will likely have a negative effect on future profits. As the U.S. Government deals with mounting deficits and a massive debt, the temptation to impose strict profit limits on the Insurance companies will become irresistible. It will undoubtedly also have wide popular support as the Unemployment Rate is forecasted to remain high for years to come leaving a large segment of the population unable to purchase insurance without heavy government subsidies.

It is at this point that the specter of the "Public Option" may once again make an appearance, as the government favored way of creating greater competition which would theoretically lead to lower premiums. Such a development would doom the insurers. While we are not yet at this point, it is nonetheless an avowed goal of the Progressives who control the Democratic Party and according to many polls a feature which is popular with the general public. Repealing entitlements is no easy task and barring some unforeseen developments very unlikely. The future of the U.S. Health Insurance providers at this point looks bleak and it appears that their best days now belong to history.

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