premiums

WellPoint pushes stock prices up, but not profits, by raising premiums

Anne Zieger — Thu, 04 Sep 2008 04:20:22 -0400

Five months ago, Angela Braly, the CEO of health plan giant WellPoint, told investors that the plan could turn around falling profits by raising premiums and squeezing providers harder on fees. (OK, she didn't say "squeeze," but that was the idea.) At the time, Braly was struggling to calm Wall Street after missing its first-quarter profit estimates by a wide margin. Your editor suggested that this just wasn't going to happen the way she described, since raising premiums in the current environment can make a lot of enemies.

Well, Ms. Braly, my apologies for being so skeptical--you've delivered on at least part of what you promised. Since that conference call, Braly has indeed overseen some premium hikes--in some cases fairly substantial ones. Unfortunately, the rest of the plan hasn't gone as hoped. According to the Wall Street Journal, WellPoint has lost a substantial 189,000 members in its individual and business plans, and expects to shed 150,000 more members by December. Some of these defections were from customers who'd bought an allegedly cheaper high-deductible plan, only to find that premiums for some jumped 30 percent or more.

Worse, despite having taken such a beating to please investors--who've rewarded WellPoint by boosting its share price back to better levels--the price is still off by about 40 percent this year. Now, WellPoint is really against the wall since it appears that it simply can't please both investors and employers. The fourth quarter of this year could be a bloodbath if WellPoint doesn't find a way to squeeze savings out of internal operations rather than expanding prices to its customers (which are, of course, what premiums are).

Now, the company is working to both get a better handle on medical costs and speed the consolidation of old claims-processing systems with newer technology. The process, execs say, created some information backlogs that led to artificially low premiums they're now correcting. Hmm...good luck selling that one, folks.

To learn more about WellPoint's struggles:
- read this Wall Street Journal piece (sub. req.)

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CT may file bill requiring health plans to issue individual policies

Anne Zieger — Tue, 19 Aug 2008 09:27:41 -0400

Even when you're not dealing with the thorny issue of policy rescissions--which has been so colorfully the case in California--individual health insurance policies are a tricky bet at best. Insurers are prone to rejecting patients who have any of a wide variety of illnesses, a perfectly legal step in most cases if they do it up front. However, five states, including New York and New Jersey, have taken these matters into their own hands. They've passed "guaranteed issue" rules demanding that health plans sell individual policies regardless of a consumer's health.

Now, it's possible that Connecticut will join the guaranteed-issue states. State Healthcare Advocate Kevin Lembo is considering asking the state legislature to file such a measure, which would arouse stiff opposition from the state's health plans. (The health plan industry says this approach just doesn't work, as it does nothing to bring healthy consumers into such plans and ultimately drives up costs substantially.) Lembo himself admits that guaranteed-issue rules could raise premiums for all persons with individual policies, as more patients with higher costs become insured. If such a bill is passed, however, he hopes to find ways to prevent any individual health plan from ending up with too many high-risk patients, which could mitigate his plan's impact.

To learn more about this proposal:
- read this Hartford Courant piece

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Medicare drug plan lower than expected

Anne Zieger — Thu, 14 Aug 2008 12:48:11 -0400

While the Medicare drug plan is going up a trifle--from $3 to $28--it's actually not growing as quickly as officials had feared. In fact, the 2009 figure is 37 percent lower than originally projected when Part D coverage was introduced in 2003. The premium's slight increase is fueled by a growth in prescription drug costs, slightly-too-low 2008 premiums and higher-than-expected costs for catastrophic care. Article

Aetna profits up on member, premium increases

Anne Zieger — Thu, 31 Jul 2008 12:26:32 -0400

Aetna has announced that its second-quarter profits have gone up 6.4 percent for its second quarter, courtesy of both rising membership numbers and a raise in premiums. The company earned $480.5 million during its second quarter, compared with profit of $451.3 million during the same period the previous year. The profit increase was fueled by a growth in revenue, which rose 15 percent to $7.83 billion from $6.79 billion.

So, how did it pull off these results? Clearly, one factor was its respectable medical benefit ratio, i.e. the percentage of each dollar of premium it spends on healthcare costs. The ratio was 81.9 percent this quarter, compared with 81.5 percent in the same quarter last year. Meanwhile, medical membership rose 0.2 percent from the first quarter to 17.5 million.

According to the Wall Street Journal, many analysts see Aetna as the best-positioned player in the managed care business. Unlike its peers, Aetna hasn't had to cut earnings forecasts, and it expects further membership growth.

To learn more about Aetna's performance:
- read this Associated Press piece
- read this Wall Street Journal article (sub. req.)

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CA doctors say state health plans made $4.3B in profits

Anne Zieger — Thu, 26 Jun 2008 01:08:11 -0400

In a study sure to raise the stakes in its battle to regulate HMO spending, the California Medical Association has released a study concluding that California health plans generated $4.3 billion in profits last year, while in some cases paying their executives high salaries. It also noted that HMOs spent $6 billion on administrative costs last year--including some high executive salaries--which it contends should have gone toward lower premiums or better benefits. It singled out annual salaries topping $1 million for CEOs at Aetna, CIGNA, Health Net, UnitedHealth Group and WellPoint.

The report comes as part of the group's longer-term campaign to enact laws governing how health plans spend their money. The association is backing a bill which would require health plans to spend at least 85 percent of their annual income from premiums on medical care. The CMA study notes that if the bill were already in place, almost $1.1 billion dollars would have been spent on patient care.

To learn more about the study:
- read this San Francisco Chronicle article

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ALSO NOTED: Health plans vow premium, reimbursement crackdown; Diabetes drug spending takes lead position; and much more...

Thu, 15 May 2008 06:59:50 -0400

> Hoping to calm nervous investors, health plans are promising Wall Street types that they're going to hike premiums and ratchet down payments to providers. Good luck, guys. FierceHealthFinance

> Here's some interesting news: Diabetes drugs have displaced cholesterol drugs as the leading drivers of prescription drug spending growth. FiercePharma

> In a recent blog entry, the Wall Street Journal's Jacob Goldstein contends that retail clinics are reaching a "Bust" stage, with some clinics closing and other companies scaling back. Blog

> In an effort to make their lives easier--and decisions simpler--New Hampshire's Blue plan is giving its physicians access to its electronic medical record via mobile devices. FierceHealthIT

And Finally... If a roach breeds in space, does anyone hear it? Article

Cigna first-quarter profits drop 80 percent

Fri, 02 May 2008 06:59:58 -0400

Uh oh--this can't be good. A multitude of insurers have have posted rather disappointing financial results, including UnitedHealth Group, Humana, Health Net and WellPoint--and now another big insurer joins the party. Cigna has announced that it saw an 80 percent drop in first-quarter profits over the same quarter last year, with earnings of $58 million this time versus $289 million one year ago. Cigna has been hit by a multitude of factors, including a tough flu season, litigation and the cost of integrating newly-acquired Great-West Healthcare. All that being said, Cigna executives did cite some bright spots in their picture, including a predicted rise of 2 to 2.5 percent in enrollment (excluding Great-West enrollees). But this is still shaping up to be a tough year for U.S. health plans generally. Brace yourself for next year: premiums are likely to shoot up, employees to carry more costs, and providers to get hit with more bad debt. It's a pretty ugly picture all around.

To learn more about Cigna's problems:
- read this Modern Healthcare article (reg. req.)

Related Articles:
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Congress passes bill banning genetic discrimination

Fri, 02 May 2008 06:59:57 -0400

In a landmark action, Congress has approved a bill banning genetic discrimination. The bill, the Genetic Information Nondiscrimination Act, forbids employers and insurance companies from using genetic tests that demonstrate a risk of conditions such as cancer or heart disease to reject their applications or set premiums. Employers also are barred from using such information to hire, fire or determine who gets promotions. President Bush is expected to sign the bill promptly. While 41 states already have enacted similar laws related to health insurance, and 31 rules regarding genetic discrimination at work, there's never been a federal law on this subject. Researchers are applauding the measure's progress, as they're worried that Americans won't participate in genetic studies unless they're confident the data won't be used against them.

To learn more about the bill:
- read this Associated Press piece

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ALSO NOTED: Provider bad debt expected to rise; Three-quarters of states developing health info exchanges; and much more...

Wed, 30 Apr 2008 06:59:50 -0400

> Analysts are predicting that with health plan profits shrinking, premiums will rise, consumers will be expected to carry more of the bill, and providers' bad debt will rise. FierceHealthFinance

> A new report concludes that 75 percent of states are developing healthcare information exchanges. FierceHealthIT

> It's looking like a new form of gene therapy may help improve the sight of the blind. FierceBioResearcher

> One Illinois hospital is offering to boost its charity care levels dramatically in an effort to get permission to relocate its campus. Article

And Finally.. A technique more commonly used in criminal investigations may someday help your hospital fight infections. Article

UnitedHealth suffers financial setback

Wed, 23 Apr 2008 06:59:58 -0400

After years of allegations that management engaged in financial manipulations to feather their own nest, some might see this as a bit of karma. Having already missed its first quarter financial targets, UHG has had to cut its full-year profit outlook. The company, which expects 2008 revenue around $82 billion, lowered its profit outlook by 40 cents a share to about $3.60. While UHG faces some unique challenges, this mirrors losses posted by other health plans, many of which seem likely to kick up premiums substantially at their next opportunity.

One major factor in UHG's adjusted prediction was customer losses. The company lost 530,000 commercial members during Q1 of this year, including 250,000 from its PacifiCare unit. Meanwhile, enrollment in its Medicare Part D program fell by 290,000. To boot, medical costs went up faster than income, despite raised premiums in 2006 and 2007.

This comes just as the air has started to clear from its former CEO's departure. Less than 18 months ago, former CEO William McGuire left the company with a mindbogglingly-golden parachute, options worth $1.78 billion at the time. Since then, McGuire has been forced to give up at least $400 million in assets, after regulators concluded that the options were back-dated to give him the highest possible value.

To learn more about UHG's financial picture:
- read this Modern Healthcare piece (reg. req.)

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