Health Care Reform and WellPoint and 2010 Year in Review

WellPoint helps usher in health care reform

December 24, 2010

After eight months of grueling debate, health care reform looked stymied in January after the victory of Scott Brown in Massachusetts gave Senate Republicans enough votes to filibuster the bill. But then President Obama revived the bill by seizing on news of sharp premium hikes on individual customers by Indianapolis-based WellPoint Inc.

CEO Angela Braly was dragged before a congressional committee, and Democrats regrouped to push the bill into law. Obama signed it March 23.

WellPoint was later blasted by critics of the law for its ham-handed public and government relations—things that were touted as Braly’s skills when she was named CEO in 2007.

“It’s been a disaster,” said Bob Laszewski, an insurance consultant in Alexandria, Va. “It’s hard to believe retrospectively in her expertise in public policy.”

WellPoint officials said Obama and his administration had “targeted and villainized” the company to rally support for health insurance reform.

The law itself is a mixed bag for WellPoint and its peers. On one hand, the law requires all Americans to have health insurance and will pay more than $40 billion a year in subsidies to help an extra 16 million Americans to buy coverage.

Already, however, WellPoint and its peers face many new regulations on their businesses. They can no longer reject customers because they’re sick and cannot cap customers’ benefits via lifetime maximum provisions.

Also, health insurers must spend at least 80 percent of the premiums they collect—and 85 percent for large-employer accounts—on medical care, potentially limiting their profits.

Lower profits and more complex regulations will lead many smaller insurers to sell to larger ones, and WellPoint executives say they expect to be active in acquisitions in the next few years.

Having an estimated 32 million new Americans with insurance coverage drew support for the law from Indianapolis-based Eli Lilly and Co. and the pharmaceutical industry. But new industry fees, larger Medicaid rebates and other provisions now have analysts expecting it to trim pharma profits.

The law also approved new methods of paying doctors and hospitals, which has accelerated a trend of doctor-hospital mergers.•

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