The Owners of Private Health Plans Politely Disagree With the President
Brad DeLong links to this interesting analysis of health insurer share prices, compared to Intrade’s odds of a government health insurance plan passing this year. The author, Arindrajit Dube (you spell it just like it sounds),concludes:
It appears that after the group of 6 announcement on July 28, the share price of the Intrade contract, “A federal government run health insurance plan to be approved before midnight ET 31 Dec 2009,” fell from around 45 to around 30, a roughly 15 point drop. This suggests the true value to these insurance companies of not having a public option may be around 6.7 (=1/.15) times the $4-5 billion change due to the announcement, or around $28-35 billion dollars.
Now let’s put aside the issue of whether it’s fair for some of the big health insurers to lose $30 billion in net worth if the government starts competing with them. Does anyone think (a) the shareholders are just falling for Glenn Beck’s scare tactics and/or (b) there will be no impact on the availability of private health insurance even in the face of tens of billions in evaporated wealth in the sector?
