Thanks, Obamacare! Health insurer stocks soar

Health insurers should thank Obama

Who says Barack Obama is bad for Corporate America?

Sure, the president is still not exactly a BFF of the big banks. He has proposed a tax on the liabilities of the nation's largest financial firms.

And in Tuesday's State of the Union he said that the nation can't "put the security of families at risk" by "unraveling the new rules on Wall Street."

But there's one big industry group that owes a huge debt of gratitude to President Obama: health insurers. UnitedHealth (UNH) reported earnings that topped forecasts Wednesday morning and its stock rose 3% to a new all-time high as a result.

Related: Obamacare website sends your data to private companies

More coverage = higher revenue and profits. UnitedHealth has outperformed the broader stock market by a wide margin since the Affordable Care Act, or Obamacare, was signed into law in March 2010.

The stock also beat the market last year as most of the provisions of the ACA went into effect and consumers started to receive coverage.

Simply put, greater access to health insurance has led to more customers for the insurance giants. And UnitedHealth is not the only company to benefit.

The other four members of the so-called Big Five health insurers -- Aetna (AET), Cigna (CI), Humana (HUM), and Anthem (ANTM) (formerly WellPoint) -- have all beaten the S&P 500 over the past five years or so as well.

health insurers surge

Related: How much Obama would raise the capital gains tax rate

Shares of the big hospital owners have done extremely well lately too. HCA (HCA), Universal Health Services (UHS) and Community Health Systems (CYH) all had banner years in 2014.

"There is greater demand for health care and that has improved profits for insurers and hospitals," said Phil Orlando, chief equity strategist at Federated Investors.

Now it's true that plans offered as a result of the Affordable Care Act are not as profitable in the short-term. UnitedHealth said Wednesday that ACA fees weighed on its earnings last year.

But that isn't stopping UnitedHealth and its competitors from trying to get approved to offer plans on even more public exchanges in the coming years.

Related: Obamacare tax surprise looming

During a conference call with analysts, Jeff Alter, the head of UnitedHealth's commercial group. said the company hoped to expand more in California and other markets in 2016 and 2017.

Health care stocks are healthy. Obamacare isn't the only reason why health insurer stocks have been so hot though. They are part of a broader rally in the health care sector.

The Health Care Select Sector SPDR (XLV) exchange-traded fund, which owns most of the big insurers but also holds drug giants like Pfizer (PFE), Merck (MRK) and Bristol-Myers Squibb (BMY), beat the market last year. It is up so far in 2015 while the S&P 500 is down.

Related: 2014 was a terrific year for stocks

Orlando points out that for many investors, health care stocks offer good growth potential but also the safety of dividends.

Many health care companies have yields that are significantly higher than the puny yields investors get from buying long-term U.S. Treasury bonds.

Pfizer, for example, has a yield of 3.4%. That's nearly double the yield on a 10-Year Treasury.

It seems unlikely that bond rates in the U.S. (or Europe and Japan) are going to shoot substantially higher anytime soon.

So that probably bodes well for the health care sector at large. But gaining all those new customers courtesy of President Obama certainly doesn't hurt either.

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