HMO Stocks Dive; Analysts Cite Concern Over Reform

Concern over Clinton Administration proposals for health care reform, along with profit taking by investors, sent the stocks of health maintenance organizations sharply lower Wednesday, analysts said.

The selloff in HMO stocks began when a securities analyst at Donaldson, Lufkin & Jenrette Securities lowered the ratings for seven operators due to concern that health care reform might hurt HMOs. Also, there were news reports that the White House will seek to curtail health costs by limiting insurance company rate increases.

Among HMO stocks, United Healthcare plunged $6.75 to $52.75, U.S. Healthcare slid $5.125 to $41.25, Wellpoint Health slumped $2.75 to $24.625, Pacificare A fell $1.75 to $36.75, Oxford Health tumbled $8.25 to $62.75 and Foundation Health lost $1.125 to $18.625.

Industry officials said they doubt that the proposed Administration reforms would hurt HMOs.

“What we’ve been hearing constantly is that our industry is kind of in the catbird seat,” said Judith Cahill, a vice president at the Group Health Assn. of America, a Washington-based trade group.

Cahill said the industry would be concerned about cost-control measures, such as limits on insurance premiums.

Analysts noted that HMO stocks frequently drop during late summer, when many employers review their contracts in preparation for employee enrollment periods.

Margo Vignola, a health care analyst with Salomon Bros., said she has been recommending that investors take profits on HMO stocks because of gains the group has made in recent months.