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What Does Health-Care Reform Mean for Managed Care?

2009 could be a year of major regulatory change for the MCOs.

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With the Democrats back in control of both Congress and the White House--and with our health-care system facing ever-growing problems such as rising costs, underfunded entitlements, and a large number of uninsured--major health-care reform has returned to the national political debate in a way not seen since the early 1990s. Originally, we thought major reform was unlikely in 2009, thanks to even more immediate economic and budgetary concerns. But almost two months into the Obama presidency, health-care reform appears to be gaining more momentum than ever, and there is a very good chance that Congress will contemplate some historic policy shifts before the year is out. The managed care organizations, or MCOs, stand to be the most directly affected by changing U.S. health-care policy.

At Morningstar, we cover 12 of the largest publicly traded MCOs. As of Monday, March 16, four of these companies carried our 5-star rating:  UnitedHealth (UNH),  WellPoint (WLP),  Aetna (AET), and  Coventry Health Care (CVH). The rest were rated 4 or 3 stars. Only two carry our medium fair value uncertainty rating (UnitedHealth and WellPoint), while the rest are rated high or very high. These two medium-uncertainty firms carry our narrow economic moat rating, with the others rated at none. Regulatory uncertainty is one of the main factors keeping our moat ratings so low.

Matthew Coffina does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.