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Health Care Can Be Good Business

Stocks in this article: PFE IHE XPH

WASHINGTON -- ( TheStreet) The stock market's rising after health care reform became law is good for American businesses of all sizes.

There is nothing bad about attempting to offer businesses a pool of healthier employees. Health care costs are out of control, and an effort to restrain employee benefit costs is worth trying. While this reform will not be as good for American business' global competitiveness as a single-payer system, it is a step in the right direction.

Four stocks on the rise that expect to benefit from the filling of the prescription drug "doughnut hole" include Pfizer (PFE), Mylan (MYL), Watson Pharmaceuticals (WPI) and Eli Lilly (LLY). Pfizer, Watson, and Lilly are all rated at 'Buy' by our stock model. Mylan is unrated at this time.

To avoid single-stock exposure, consider iShares Dow Jones US Pharmaceuticals (IHE) or SPDR S&P Pharmaceuticals ETF (XPH). Both of these funds rank at C-plus, or the top end of the 'Hold' range.

While these companies and funds could have done poorly if the Obama administration had pushed through Medicare drug-price negotiations, the threat of pharmaceutical industry political power to prevent comprehensive health care reform caused the president to sidestep potential adverse impacts on these companies, making them winners instead of losers.

The most sweeping revamping of American health care in a half-century include changes that start immediately even as opposition forces reload to continue the fight. Clarity of the changes that will be phased in over the next few years also present an improved outlook for certain stocks and funds.

President Obama

Some of the biggest reforms, such as the health insurance exchanges designed to increase bargaining power of individuals and the lowering of cost by pooling risk will take a few years to phase in. After the bill-signing Tuesday, President Obama reminded the public of the immediate benefits at an Interior Department meeting.

He discussed how small businesses will get tax credits to purchase coverage. Children with pre-existing conditions can no longer be refused coverage nor have their parents refused coverage. All children can now stay on their parents' plans until age 26. So-called "rescission," where insurance companies retroactively drop your coverage after you get sick, is banned.

Lifetime and restrictive annual caps on coverage go away. The Medicare Part D "doughnut hole" on drug expenses between $2,830 and $6,400 is beginning to be filled in for senior citizen-prescription drug coverage. That starts with a $250 rebate this year, a 50% discount on brand name drugs beginning next year, and the benefit gap closed completely by 2020.

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