Tickers in this Article: UNH, WLP, HUM, AET
With the newly passed healthcare reform bill set to increase the number of insured by approximately 32 million beginning in 2014, a huge additional market is being created for the healthcare industry. Despite the partisan squabble about whether this bill will ultimately create a fiscal disaster, the demand for all manner of healthcare services will most certainly go up.

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Stick With the Obvious
The main purpose of the healthcare reform was to create a viable option for uninsured Americans to obtain insurance coverage. While there's no denying that such an undertaking will indeed lead to additional spending from Uncle Sam, I'm inclined to believe that reform, even if it's not perfect, is better than no reform. We got reform, and without a government insurance agency. So insurance companies are going to benefit tremendously as they prepare to take on millions of new Americans. (For more, see Investing In Health Insurance Companies.)

Economies of Scale
Insuring this new market pool will not be simple or cheap. For one, insurance companies will no longer be able to deny folks with pre-existing conditions. This means that the new pool of insureds may not be as profitable as the current insured. Insurance companies may experience an increase in claims paid relative to premiums collected. Over time, however, I suspect that the insurance companies will ultimately benefit from having more people. (To learn more about what the bill entails, read 10 Ways The New Healthcare Bill May Affect You.)

Having more people paying premiums increases the likelihood of profitability even with increased medical claims. So in this instance, investors need look no further than the big players like WellPoint (NYSE:WLP), UnitedHealthCare (NYSE:UNH), Aetna (NYSE:AET) and Humana (NYSE:HUM). WellPoint serves over 30 million members, while UnitedHealth covers over 70 million Americans. Together these two names insure more than one-third of the American population. They can easily absorb several million more in a profitable manner. Humana, with nearly 20 million members, has a strong government insurance program and looks poised to benefit from increases in Medicare and Medicaid. Plus, the stock trades at less than eight times earnings.

Pure Darwinism
The 2,000 pages of the healthcare reform bill will surely be susceptible to changes, additions and interpretations. Shares in insurance aren't going to surge on the news, either. Nevertheless, major insurers are one of the most attractively valued industry groups today and will likely do very well over the next few years. (For more, see Buying Private Health Insurance.)

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