The fast start for US health insurer shares this year may turn into a long climb. Shunned like pariahs during the economic crisis and healthcare reform debate, the stocks have caught fire, with the Morgan Stanley Healthcare Payor index of large and small insurers up more than 16 percent so far in 2011 compared with a 5 percent rise for the broader S&P 500 index.
Many investors have already accounted for the potential near-term costs of a US health overhaul law passed last year and its impact on the industry's bottom line. Some of that impact may even be delayed by efforts to undermine the law from a new Republican leadership in the House of Representatives and by legal challenges in court.
Companies like Aetna Inc and UnitedHealth Group Inc posted strong financial results in 2010 and provided reassuring forecasts for 2011, when rules from the new law begin that require certain levels of spending on medical costs.
They could also benefit if Americans remain cautious about their own healthcare spending and an anticipated rise in medical procedures fails to materialise.
US and foreign mutual funds added more than $4 billion of health insurance stocks to their portfolios on a net basis at the end of the year, according to recent data compiled by Thomson Reuters.
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