What does health reform mean for the health care industry?

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. President Obama's health insurance reform efforts, as embodied in the bills passed by the House and Senate in late 2009 and signed into law in March of 2010, have been described both as a boon and a death blow for private insurance industries. Using stock-price data on health care firms in the S&P health index, we exploit Republican Scott Brown's surprise victory in the Massachusetts Special Senate election to fill the seat of the late Ted Kennedy, which stripped Democrats of the 60-vote majority needed to pass the bill in the Senate, to evaluate the market's assessment of health reform on the health care industry. We find that the reduced likelihood of Health Reform's passage after the Brown election led to a significant increase in health industry stocks and average cumulative abnormal returns of 1.2 percent, corresponding to an increase in total market value of approximately $14.5 billion. Focusing on managed care (insurance) firms, we find an average cumulative abnormal return of 6.5 percent (a $6.7 billion increase in market value), with individual firms' cumulative abnormal returns ranging from around 5 to 9 percent"--National Bureau of Economic Research web site.