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WellPoint shares suffer

December 29, 2008
It was a bad year to be a shareholder of most companies. But investors in WellPoint Inc. twice took it on the chin.

The value of the Indianapolis-based health insurer's stock lost more than 55 percent of its value during the year.

Of course, WellPoint's stock price dropped with just about every other company's, beginning in late September. WellPoint's troubles compounded, however, when it reported that it lost $318 million on investments in Fannie Mae, Freddie Mac and Lehman Brothers—which have either been nationalized or collapsed.

But the biggest stock shock came in March when the company acknowledged it would badly miss its first-quarter and full-year profit expectations. WellPoint's shares tumbled 28 percent in one day.

WellPoint's woes began with computer problems inside the company, which stem from two recent acquisitions.

WellPoint was created in 2004 when Indianapolis-based Anthem Inc. acquired California-based WellPoint Health Networks Inc. and took that company's name. In 2005, WellPoint acquired New York-based WellChoice Inc.

WellPoint CEO Angela Braly said WellPoint stumbled while trying to integrate computer systems after those two mergers. Claims-processing delays meant WellPoint's actuaries could not see several large-dollar claims coming in at the end of 2007. As a result, WellPoint underpriced its health insurance policies for 2008.

In Indiana, WellPoint's Anthem subsidiary has angered doctors with an outbreak of slow payments, underpayments and denial of claims—all of which also stem from its computer problems.

Anthem is under investigation by the Indiana Department of Insurance after a spike in complaints. It also was sued by the Sisters of St. Francis hospital system, which raised the claims-payment problems as part of a contract dispute.

Anthem told the Indiana State Medical Association in December that it expects to clear up all its computer problems by April 2009. 
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