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Sunday, May 16, 2010

Ind. Gov't. - A quite long NYT story on WellPoint

The NY Time's Sunday business section has a lengthy story today by Reed Abelson headlined "A Scrappy Insurer Wrestles With Reform." A few quotes:

But it is WellPoint, one of the companies that may have the most to lose under the new health care law, that seems unwilling — or unable — to avoid controversies that make it an easy target in Washington. In the last weeks of the debate over health care legislation, for example, WellPoint became the focus of lawmakers’ indignation over its decision to raise premiums in California as much as 39 percent.

Hauled before Congress in February to justify the decision, Ms. Braly refused to back down, although the uproar over the proposed increases might have helped hasten the legislation’s passage.

“They threw gasoline on the dying embers of health reform,” said Robert Laszewski, an industry analyst in Alexandria, Va. WellPoint withdrew the request after state regulators found it had made significant errors in the application.

Unlike some commercial insurers, WellPoint has bet heavily on the generous profits that flow from selling health insurance to individuals and small businesses. The company, which operates Blue Cross plans in more than a dozen states, is under pressure to deliver results under the new law, which sharply limits the prices it can charge and will eventually require it to cover all potential customers regardless of whether they have an expensive medical condition.

“They are going to have to fundamentally rethink how they are going to do business,” said Peter T. Harbage, a policy analyst and former California health official. “The question is whether WellPoint is going to be able to reform itself.”

Ms. Braly argues that WellPoint is well positioned because of its size and the strong appeal of the Blue Cross name. “We have a lot of historical strengths,” she said in an interview last week at the company’s headquarters in Indianapolis. But, she said, WellPoint is now focusing on what it needs to do in the wake of the new law’s passage. “There are new parameters,” she said, “and new marketplace rules.”

Some people say WellPoint’s combative stance reflects just how worried the company is about the future. “In some ways, WellPoint feels more embattled,” says Jerry Flanagan, a consumer advocate in California, because it dominates the increasingly regulated individual market, and this “puts them into a defensive mind-set.”

In the months after the bruising battle over the health care legislation, the company still seems to be fighting the last war, despite its protests that it has moved on. During a recent call with analysts, Ms. Braly repeated her complaint that insurers were being blamed unfairly for the rapid increases in the cost of care.

“We are being targeted and villainized,” she said. “They are shooting the messenger.”

OVER the last decade, WellPoint has become one of the nation’s largest insurers by buying up the Blue Cross plans that dominate the individual and small group markets in their states.

“That was a great strategy for a long time,” says Thomas A. Carroll, who follows the company for Stifel Nicolaus, the investment firm in St. Louis. “It was a way to basically add market share and add revenue. Investors liked it.”

WellPoint now has about 34 million customers, putting it ahead of the UnitedHealth Group in membership, and $60 billion in revenue, second behind UnitedHealth. While UnitedHealth and the other national companies tend to focus on providing services to large employers with workers in multiple locations, WellPoint’s focus has been on the local markets. Its strong presence allows it to demand the lowest prices from doctors and hospitals, while still offering customers a broad network of providers from which to choose.* * *

In the last year, WellPoint became a favorite example of Congress and the administration for why health care overhaul was needed. Even people inside the industry say the company has been painfully slow to recognize consequences of some of its controversial actions, whether canceling a sick patient’s coverage or raising premiums on policies that lawmakers already call too expensive. And some say that Ms. Braly’s quickness to argue with WellPoint’s critics, revealing her training as a lawyer, is not always productive.

“WellPoint is the most incredibly tone-deaf insurance company in an industry full of deaf executives,” says Mr. Laszewski, the Virginia consultant. He criticizes Ms. Braly, who received $13.1 million last year in compensation, as being insensitive to the politics involved in running a health insurer, at both the state and federal levels. “I don’t think she has the scar tissue and experience,” he says. “I don’t think she has the marketplace instincts.”

Posted by Marcia Oddi on May 16, 2010 07:37 PM
Posted to Indiana Government