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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WellPoint loses money for Q2, but still pleases investors

Anne Zieger — Fri, 25 Jul 2008 11:47:49 -0400

Giant health plan WellPoint had what most financial types would consider a tough second quarter, with earnings falling 10 percent and its overall profit predictions for 2008 falling. Still, given that these numbers were better than investors were expecting, the company's stock did OK, nonetheless.

WellPoint's second-quarter net income fell to $750.5 million or $1.44 a share, from $835.2 million or $1.35 a share, a year earlier. Meanwhile, WellPoint has cut back its 2008 earnings projections, with the company now forecasting profits of $5.42 to $5.57 a share rather than $5.42 to $5.67. (While that's a small difference on the top end, every trim-back hurts, particularly on the Street.)

WellPoint CEO Angela Braly said that the lower forecast comes from bigger drops in enrollment in its commercial plans than it had expected. In fact, the company expects health-plan enrollment to fall by 150,000 in the second half of this year. She also noted that recent settlements with California regulators over its rescission policies for individual policy-holders have had an impact.

That being said, executives were able to point to some successes. For example, WellPoint cut its backlog of medical claims by 23 percent from the end of 2007, sped up its claims-paying system and revised its premiums to make sure it won't be taking big medical losses in the future, they said.

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

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