Senate Vote Moves Health Care Reform Closer to Finality

The landmark health care bill that will bring coverage to 30 million Americans that currently are without it has passed a key Senate vote that will now almost assure its passage by Christmas.

The bill passed the Senate with a 60-40 vote in the pre-dawn hours of Monday morning. All 58 Democrats in the Senate and two Independents voted in favor of the bill to sweep aside the Republican objections to the health care overhaul.

Under the bill, insurance companies would be restricted from denying coverage to those with pre-existing medical conditions. Coverage for patients with pre-existing ailments would go into effect next year for children and in 2014 for adults.

Senator Ben Nelson of Nebraska cemented the 60-vote majority after he successfully lobbied for concessions.

The bill will bring health care to poor Americans over the next decade, but leave intact the current employer based health-insurance system. Companies that do not offer affordable health coverage could be forced to pay a fee to the government if the bill is signed into action by President Obama.

The Congressional Budget Office has forecasted that the bill will cost $871 billion over a decade, and would cut an estimated $480 billion in payments to the providers of Medicare for elderly and disabled Americans.

One late change to the bill placed a 10 percent tax on customers that use indoor tanning salons, which replaced a proposed tax on cosmetic surgery.

President Obama would like to sign the bill before his State of the Union address so he can put this issue behind him to focus on other matters that voters are concerned with, including the economy and job market. The change of focus would also be a maneuver to boost the Democratic position in the 2010 midterm elections. This bill will likely be a key issue during election time, given the partisan nature of the vote.

Analysts for Goldman Sachs see the bill as a more workable form of health-care legislation.

"Overall, the changes are mostly as expected and represent a more workable version as compared to the original bill. As previewed, there is no public option or Medicare 'buy-in' and the mandate penalty is strengthened somewhat," the analysts said.

Goldman Sachs favors managed care provider CIGNA Corp. (NYSE: CI) on the developments.

"We expect a positive market reaction to the amended legislation. CIGNA remains our favorite in the group. We continue to expect an end to health reform uncertainty will support rotation into managed care. Aside from reform, the important backdrop to our sector view is fundamentals, which are decidedly mixed but with the key being that downside risk to commercial margins is mitigated by firming of industry pricing, signaling we are nearing the end of the underwriting downcycle."

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