The Obama Effect

I just got done watching President Obama deliver his speech about healthcare reform. All I could think during his speech was how this was going to affect health insurers. The message seems to be that these insurers have plenty of spare fat to be trimmed, and with this means that profit margins will narrow if the insurers are not able to cut costs. If this plan is put into motion, and it is still far off, it will put quite a bit of pressure on them to meet these expectations. Stock prices these days are based on earnings, and in this day and age there is a lot to be said about expected earnings. With the pressure of reducing costs to maintain earnings, it is fairly likely the prices that can be justified today for a share of these companies will not be justified by future earnings. Based on the implications of this new plan, I would imagine that the prices of health insurers stocks should decline, likely now, and likely in the future, at least until the insurers bring down their overhead costs.