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WellPoint fires exec after Medicare woes

February 13, 2012

WellPoint Inc. finally canned the head of its consumer business after a string of disappointing results, and so far the move hasn’t further spooked the company’s jittery investors. Although that’s not saying much.

The Indianapolis-based health insurer dismissed Brian Sassi, according to a Feb. 8 securities filing. The unit Sassi ran includes WellPoint's Medicare Advantage plans, some of which have caused problems for WellPoint for months.

Last year, WellPoint lost $150 million due to a Medicare Advantage plan that attracted more customers with a higher risk profile than the insurer expected because a competitor left the market. Those customers generated more in claims than they provided in premiums.

That problem popped up in July and, at the time, WellPoint executives said their June acquisition of CareMore Health Group and its highly regarded managers would help. CareMore specializes in caring for and insuring Medicare patients.

But it’s not clear the expertise of CareMore’s managers has been sought out and applied by WellPoint’s top executives.

WellPoint executives tried to assure analysts last month that the Medicare problems won’t be a problem in 2012. The company reaffirmed its profit forecast of $7.60 per share.

Many investors were not convinced, however, and the company’s stock price has fallen 8 percent since its earnings report.

“WellPoint couldn’t have known the Medicare business would perform so badly in the fourth quarter when they submitted 2012 Medicare bids back in June,” Citi analyst Carl McDonald wrote in a research report. He added, “WellPoint didn’t do a real effective job of explaining why it wouldn’t be a problem in 2012.”

Sassi’s departure didn’t send WellPoint’s stock up or down. He is staying on until March to help with a transition. No successor has been named.

After speaking to company executives, Susquehanna Financial Group analyst Chris Rigg wrote in a research note that Sassi's termination appears to be caused by "multiple years of underperformance in the division."

"While management turnover has been an issue for the company in recent years, we do not believe the announcement signals 2012 EPS guidance is at risk," Rigg wrote.

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