- Commentary -

December 22, 2009 (FinancialWire) (By Philip Holmes) – Leading Democrats are celebrating the imminent passage of the U.S. Senate’s version of the health insurance reform bill, whose overall passage is the centerpiece of the Obama Administration’s domestic legislative agenda. Also celebrating are investors in big health insurance firms like Cigna Corp. (NYSE: CI), Aetna Inc. (NYSE: AET) and Humana Inc. (NYSE: HUM). Is this an eerie coincidence?

The three stocks closed at $37.19, $34.14 and $45.04, respectively, on Monday. Each posted respectable single-digit gains on the day.

A one-day bounce in these stocks isn’t big news, per se. Investors are no doubt relieved that a final form of the legislation has taken shape. But for anyone thinking this year that the Democrats’ health care agenda was worrying to the insurance business needs to look at the longer-term recent performance of these stocks.

Humana is a good example: after taking a 20 point plunge earlier in 2009 the stock has been on a steady upward trajectory since early April. Aetna and Cigna’s trajectories are remarkably similar.

At no time since March did any of these stocks plunge, not even when it looked like the “public option” would survive in some form. (Indeed, a weak version of the public option is still in the House version of the bill).

So, what’s clear is that investors weren’t buying the rhetoric of the Tea Bagger movement: that Team Obama was forcing a government takeover of health care and that even a weak public option was a Trojan Horse designed to pave the way for socialized medicine.

Investors saw three things: The first was a juicy mandate on the uninsured, particularly the young, profitable ones. They also saw, and believed in, the insurance industry’s ability to shape the legislation forcefully. Finally, they saw the president first cutting deals with industry lobbyists, then distancing himself from earlier strong support for a public option.

Indeed, the president went out of his way to let industry puppets shape the legislation over the crucial summer months. He was all but absent from the fray in August and his only address of the public option was to call it a “mere sliver” of the overall reform effort.

His right-hand man, Rahm Emanuel, did even more to beat down any pretense of a progressive revolution in health care, even bragging to the Wall Street Journal that there were “no liberals left to get.”

Investors never saw Obama as playing Rope-A-Dope with insurers, drug companies and hospital operators. No, they saw him applying the famous Ali tactic with the left wing of his own party. Or something close to it.

Politicos of all stripes will debate the merits of the Obama strategy. Progressives insist that Obama has hopelessly alienated his left wing base and that there will be dire consequences when these former stalwarts sit out the midterms. Many rightists agree with this analysis.

But Clinton-era party moderates like Emanuel are using an old and trusty formula. They legislate to the right to “get a bill done” and assume that the lefties will fall into line come election season. A lot of working poor people will get subsidized health insurance and, besides, who else is the left going to turn to?

Other Realpolitic hard cases point out that, with the likes of Lieberman and Nelson in the Senate, only an industry-friendly bill would have a hope of avoiding filibuster threats. The progressives never stood a chance.

The debate over Senate rules will heat up no doubt, but not in time to save lefty dreams of a march toward single payer. That march may come anyway, prodded on by runaway health care spending. This will be especially fast moving if hoped-for savings in Medicare fail to materialize. In the meantime, we can all marvel at the levels of corruption and cynicism on display in the sausage factory.

[Go to http://www.financialwire.net/?s=philip+holmes to see more commentaries by Philip Holmes.]

The FirstAlert(tm) Economics Calendar lists Gross Domestic Product for Q3 (8:30 a.m.), Weekly Chain Store Sales (8:55 a.m.), Existing Home Sales for November (10 a.m.).

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Today in History: The Embargo Act, forbidding trade with all foreign countries, was passed by the U.S. Congress in 1807, at the urging of President Thomas Jefferson. The Non-Intercourse Act, lifting the Embargo Act except for the United Kingdom and France, passed the U.S. Congress in 1809. “The Night Before Christmas” by Clement Moore was published in 1823. Ito Hirobumi, a samurai, became the first prime minister of Japan in 1885. The Lincoln Tunnel opened to traffic in New York City in 1937.

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