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Hospital shares jump, insurers fall after Obama win

By Caroline Humer

(Reuters) - Shares of hospitals and other healthcare companies that will benefit from President Barack Obama's health reform legislation jumped on Wednesday after his election victory, but health insurers fell as the law's costs became more certain.

Obama's re-election has taken a Republican vow to repeal the health care reform off the table, though some industry executives said on Wednesday that some aspects of the law still may be changed or delayed.

"I'm expecting some change in terms of how the affordable care act might be rolled out, the timing as well as the form," Mark Thierer, chief executive of pharmacy benefits manager Catamaran Corp., said in an interview, pointing to the debate over the $600 billion fiscal cliff of spending cuts and tax rises that could occur in January.

The U.S. Patient Protection and Affordable Care Act is expected to be mostly in place by the end of 2014. It is expected to expand health insurance coverage to about 30 million people over the next decade through both government-paid insurance and private insurance available on health exchanges.

The insurance expansion is based partly on the states taking a larger role in Medicaid, the government health insurance program for the poor, and in running private health insurance exchanges where consumers can buy policies.

Providers like hospitals and doctors, medical device makers, drug companies, prescription management companies, and health insurers are all affected by the law.

But investors were seeing the most potential for improvement at hospitals, which have been dealing with high debt loads from covering costs for care of the poor. As more of them are insured, hospitals will pay less out of their own pockets.

"Their bad debts will not be as big starting in 2014 as millions of more people become insured. They'll either be covered by Medicaid or purchase insurance through state exchanges, and will receive government subsidies," said Michael Liss a portfolio manager for American Century Investments.

Shares of HCA, the largest for-profit hospital chain in the United States, rose 7.2 percent to $33.16. Tenet Healthcare Corp. gained 7.4 percent to $26.81, and Community Health Systems was up 5.6 percent to $30.28.

Pharmaceutical companies, medical device makers and medical supply companies may face higher costs, depending on how the law's independent payment advisory board operates, Liss said. That board is tasked with keeping prices low.

Election results were not viewed as favorable for healthcare insurers with large employer-based businesses, including UnitedHealth Group and Aetna, and their shares were off. Healthcare reform sets limits on the companies' profits and mandates on coverage.

UnitedHealth dropped 4.5 percent to $53.85, and Aetna fell 3.7 percent to $42.96.

"There's a little bit of disappointment that you're not going to see any easing of the regulations on the insurance industry that are going to be put into place under the Affordable Care Act. At the same time it's not a change in the current operating environment. It's mostly just a change in expectations," Leerink Swann analyst Jason Gurda said.

Healthcare reform is, however, expected to help insurers that cater to the poor through Medicaid as more states are expected to expand their programs under Obama, Shares in Centene Corp., for instance, rose 6.7 percent to $42.54

(Reporting By Caroline Humer and Ransdall Pierson; Editing by Leslie Adler)

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