Shares of the largest health insurers climbed in trading Monday while the broader market fell slightly, even though the sector received mixed reviews from analysts.
Goldman Sachs analyst Matthew Borsch said in a research note he upgraded the managed care sector to "Attractive" from "Neutral" due in part to improving fundamentals from insurers and "limited downside risk" from the health care overhaul debate taking place in Congress.
Health insurance stocks have climbed and fallen for months over developments in this debate. Congress is considering bills that aim to cover uninsured people and control spiraling medical costs.
Investors have worried, in particular, about a proposal to create a government-funded public insurance plan that would compete with private health insurers. But Borsch said in his note he believes Senate moderates will succeed in curbing provisions like that, which could "imperil the future of the private-sector health insurance industry."
"Key to our view is that an end to health reform uncertainty (in a better-than-worst-case outcome) will be a positive catalyst, bringing investors back into the sector," he wrote.
Borsch also said insurers have practiced conservative underwriting, and margin downside risk seems limited for next year.
Wells Fargo analyst Matthew Perry lowered his rating on the managed care sector to "Market Weight" from "Overweight." Perry said in a separate note he believes the sector could trade down as passage of the Senate's health care reform bill becomes more likely.
Perry said he thinks the Senate bill will pass quicker than the market expects and won't be "watered down." He said these views have not been fully priced into managed care stocks.
The Standard & Poor's 500 index fell less than 1 percent in trading Monday afternoon while several insurance stocks rose.
Philadelphia-based Cigna Corp. climbed 4.1 percent, or $1.32, to $33.48; Hartford, Conn.-based Aetna Inc. rose 3.24 percent, or 94 cents, to $29.92; Minnetonka, Minn.-based UnitedHealth Group Inc. rose 3.13 percent, or 86 cents, to $28.32; Indianapolis-based WellPoint Inc. was up 1.87 percent, or $1.01, to $54.89; and Louisville, Ky.-based Humana Inc. climbed 1.19 percent, or 48 cents, to $40.79.