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Life Health > Health Insurance > Health Insurance

The Catch: WellPoint Reports Earnings

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WellPoint Inc. (NYSE:WLP) did not use the terms “rebate” or “medical loss ratio” in its latest earnings release.

WellPoint, Indianapolis, is reporting $857 million in net income for the first quarter on $15.4 billion in revenue, compared with $927 million in net income on $14.9 billion in revenue for the first quarter of 2011.

The company ended the quarter providing or administering medical coverage for 34 million people, down 1.7% from the number it was covering a year earlier.

Enrollment in small, “local group” commercial plans and large, “national account” commercial plans fell 3%, to a about 22 million.

Enrollment in multistate BlueCard plans, which give enrollees in commercial group plans access to a national network, increased 1.4%, to 5 million.

Enrollment in individual commercial programs increased 0.3%, to $1.9 million.

WellPoint says it gave up much of the commercial business voluntarily, by repositioning products in the New York small group market and increasing some national accounts’ administrative fees.

“Enrollment was also impacted by in-group membership attrition and competitive situations in certain local group markets,” the company says.

The Patient Protection and Affordable Care Act of 2010 (PPACA) now requires health insurers to spend 85% of large group premiums and 80% of individual and small group premiums on health care and quality improvement efforts or else pay customers rebates.

Most health insurers seem to be shying away from saying much about rebates. UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), recently said it was getting a $130 million gain from rebate calculation changes, but it said little else about rebates and rebate calculations.

During a conference call, WellPoint Chairman Angela Braly did mention the PPACA minimum medical loss ratio (MLR) requirements briefly in her introductory remarks.

The minimum MLR requirements did contribute to a modest increase in the commercial plans’ MLR,  and tough competition was another challenge, Braly said.

“While the overall competitive environment remains rational, we have lowered our year-end 2012 fully insured membership expectation as we maintain pricing discipline,” Braly said.

Later, while answering analysts’ questions, WellPoint executives said the company is operating based on the assumption that PPACA is the law of the land. The company said it has been adjusting rebate estimates all along and is not going to announce the kind of unlocking of rebate money that UnitedHealth has announced.


One private exchange company, Liazon Corp., Buffalo, N.Y., says it will get $18.2 million in new investor funding, and another company, Inc., Charleston, S.C., says it has started a private exchange for large investors.

Part of PPACA calls for the U.S. Department of Health and Human Services (HHS) to work with the states to set up a national network of government-supervised exchanges, or Web-based insurance supermarkets, that would be responsible for distributing Medicaid coverage and other coverage for people who are poor. The exchanges also would give individuals and small groups the ability to use new tax breaks to buy coverage.

The Supreme Court is preparing to rule on the constitutionality of PPACA in connection with a number of lawsuits. Other suits challenging the constitutionality of PPACA are in the pipeline, and members of Congress are working to repeal the law.

But some companies say they see opportunities for exchanges in the ordinary commercial market, no matter what happens to the PPACA exchange system provisions.

Liazon, a company that operates the Bright Choices private health benefits exchanges, says it has closed on a new round of funding from a group that includes Bain Capital Ventures, an affiliate of Bain Capital, Boston.

Bain Capital was founded by presidential contender Mitt Romney.

Ashok Subramanian, the chief executive officer of Liazon, says his company will use the new funding to try to add customers.

Liazon now serves about 2,000 employers and “ten thousands of individuals” at those employers, the company says.

Benefitfocus, a benefits technology, says its own new HR InTouch Marketplace will be private benefits exchange aimed at large employers.

An employer could use the system to replace a “defined benefit” health insurance program with a “defined contribution” approach, Benefitfocus says.

The system provides animated “avatars” for employees who need extra help understanding the system.


Independence Holding Company, New York (NYSE:IHC), iscounting on the idea that the future will be bright for specialty and niche health products.

The company will develop products such as accident insurance, critical illness insurance pet insurance that could fill gaps if PPACA, or state versions of PPACA, end up reshaping the major medical market.

Dave Keller, a former senior vice president of sales and marketing at IHC Health Solutions, and Brian Dow, at former senior vice president of ecommerce and business development for IHC Health Solutions, will work with Jeff Smedrud, the chief marketing officer at IHC, to run the new niche products business.


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