- Commentary -

September 17, 2009, 2009 (FinancialWire) (By Philip Holmes) - Stocks ended higher on Wednesday on optimism about economic recovery. Apple (NASDAQ: AAPL) and GE (NYSE: GE) were among the winners. Senator Max Baucus revealed his much-anticipated legislative proposal, and it contained no surprises. Should you now be investing in the health insurance sector?

The Dow Jones industrial average gained 108.30 points during the trading session, to end at 9,791.71. The Standard & Poor’s 500-stock index rose 16.13 points, to 1,068.76, while the Nasdaq composite index jumped 30.51 points to finish at 2,133.15.

It wasn’t big news that had investors jazzed. Sure, the National Association of Home Builders have perked up a bit, as has the CPI. But the bullish mood had more to do with a recent accumulation of recovery sentiments, and rumors that M&A activity is on the rise. Adobe’s $1.8 billion deal to acquire Omniture helped sell that theory.

Also recovering: Citigroup. At least according to CEO Vikram Pandit, who told the Street that his company has “turned a corner” and is now seeing fewer consumer delinquencies.

Senate Finance Committee chairman Max Baucus released the fruits of his team’s health insurance overhaul labors on Wednesday. To no one’s surprise, the plan did not contain a “public option.” Nor did it call for draconian new measures to regulate health insurance companies. The plan does, however, call for all Americans to buy health insurance, or else.

Or else what? Baucus’s plan is lacking in specifics, but it generally meets with the terms that health insurance lobbyists have been calling for all along: mandates without a public plan. This should add up to hundreds of billions of new money flowing into the sector. So, should investors pile on?

Better wait till the fat lady sings, (and no, we’re not referring to the svelte Olympia Snowe). Expect sparks to fly within the Democratic party if a Baucus-like bill makes it to Obama’s desk. Even if it makes it to the reconciliation process. There is no plan for cost containment within these guidelines, other than to saddle middle-class Americans with a backdoor tax in the form of mandated coverage. Other legislators may use the same industry-friendly guidelines but up the government’s contribution toward subsidizing the purchase of insurance.

But that would run the projected cost of the overhaul way beyond current estimates. Unless there is a credible means of reducing both health-care insurance and health-care delivery costs this turkey has no chance of flying. It’s a plan to bankrupt either the treasury or the middle class, or both.

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

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