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Are Health Insurance Stocks About to Get Sick?

NEW YORK ( TheStreet) -- Health insurance stocks have soared since their 2009 lows -- but could possible Medicare cuts, the still-bleak U.S. job-market situation and the anticlimax of the Republican senate victory lead to downward pressure on the sector?

For months investors have been agonizing over how the Obama Administration's health-care reform plans would impact health-insurance stocks, as the companies worried that their businesses could take a hit with reform. The primary concerns of those companies were more taxes, fees and tighter regulations as a result of possible reform, which aimed to expand health care coverage to millions of Americans who don't have any right now.

Thus, the health-insurance stocks, as one can imagine, got a nice boost when it became quite clear that Republican Scott Brown was about to gain control of the Massachusetts senate seat left behind by the late Ed Kennedy. Brown's upset victory on Jan. 19 may have undermined the Obama Administration's healthcare reform plans, by denying the Democrats the fillibuster-proof 60-seat majority they had previously enjoyed.

But now that some of the initial excitement over the Republican victory has quieted down, some think that there will not, in fact, be a big upcoming boost for health-insurance stocks in the foreseeable future. Indeed, the Obama Administration's plans could be revived in a major way, which would likely send health care insurance stocks noticeably lower.

Another issue, as raised by Jim Cramer on his CNBC Mad Money show on Jan. 22, is that a few of these companies have significant Medicare exposure -- and Medicare will most likely be cut to make up for huge government deficits. Among them are Unitedhealth (UNH), Humana (HUM) and RehabCare (RHB).

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