NEW YORK (Reuters)—Shares of U.S. health insurers rose on Monday as investors reacted positively to the latest legislative developments on health reform.

Health insurance stocks have swung dramatically this year on prospects for an overhaul of the U.S. health system, as investors fear reform will severely hurt the industry's future profits.

Over the weekend, a reform plan cleared an important hurdle in the U.S. Senate, but a number of key senators remained uncommitted to the legislation itself. Debate on the bill will start Nov. 30 and is expected to last at least three weeks.

"If anything, you're going to have to moderate the bill to keep people in place, which bodes more well for this group because it takes some of the really scary stuff out of the equation," said David Heupel, a portfolio manager with Thrivent Investment Management.

While reform has created uncertainty for the stocks, Mr. Heupel said, "You're starting to at least have the ability to frame things" as the reform debate draws to a close.

"This business isn't going to go away, and while there may be some negatives from health care reform, there still will be a for-profit HMO industry, and these stocks used to trade as if there might not be," he said.

Shares of the S&P Managed Health Care index of large health insurers rose 3.5% in afternoon trading, outperforming a 1.5% rise for the S&P 500 index.

CIGNA Corp. shares jumped 7.3%, WellPoint Inc. rose 4.1% and Aetna Inc. increased 3.7%.

CIGNA and WellPoint in particular were benefiting from a report from JPMorgan analyst John Rex, who upgraded his ratings on the two stocks to "overweight" from "neutral."

"In the end, these stocks are really still all about reform," Mr. Rex said of health insurer stocks in his research note.

"We are now much closer to resolution, and the outcomes are now more analyzable...and health benefit companies are still going to be around and relevant even in a post-reform world."

Mr. Heupel said investors also may be positioning themselves in the event reform legislation fails.

"There is a possibility...this could not happen, this could feasibly fall apart," Mr. Heupel said.

"I think everyone is a little concerned that if they don't have any exposure here it could really hurt, because if that were to happen this group would by far put up some monster performance short term."