This is where Aetna, Cigna and Coventry enter. These companies wouldn't lose out on as much revenue because small group and individual insurance make up relatively small percentages of revenue for them.
"There aren't any companies anymore that sort of make 100% bet on small group and individual business," said Dave Shove, health care analyst at BMO Capital Markets. "Almost 30% of WellPoint (WLP) is small group and individuals; a company like Humana it's about only 5% or 6% of their business; Cigna it's maybe 1% or 2%."
Rigg said he thinks the diversified health care stocks could move 10% higher or more if Obamacare is struck down entirely.
"Because of all of these things we talked about at the outset: minimum medical loss ratio, the uncertainty around exchanges, rate review -- just that regulatory burden is lifted," Rigg said.Minimum medical loss ratio is like the inverse of gross margin, or your cost of goods divided by revenue. The percentage in the small group and individual business has to be at least 80% and in a large group market at least 85% or else the company has to rebate the money to consumers, Rigg said. In this case, the law would have capped the gross profit percentage of these companies. So what if the whole law is upheld? "I would probably speculate that the
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV