Insurers and Insurance and WellPoint and Health Care Reform and Health Insurance and Health Care & Life Sciences and Health Care & Insurance

Health reform breaking WellPoint's way so far

August 24, 2009

Health insurance reform is shaping up to be a boon for companies like Indianapolis-based WellPoint Inc.

With the Obama administration backing away from a government-run insurance plan, the industry faces a much smaller threat in the form of government-launched but privately run insurance co-ops.

Current reform proposals call for greater regulation of health insurers — such as forbidding them to deny coverage based on pre-existing conditions. But they also would require all Americans to buy health insurance — a law any industry would love. That could mean the 46 million uninsured, many of them young and healthy, would become lucrative health insurance customers.

On top of that, health reform proposals would give taxpayer funds as subsidies to help Americans buy health insurance.

“A co-op plan just doesn’t hinder or threaten their ability to continue operating the way they do,” David Heupel, a portfolio manager with Minnesota-based Thrivent Investment Management, told Reuters on Monday, the day after Obama’s top health official, Kathleen Sebelius, said the government-run plan was not an “essential element” of health care reform. “It is by far the lesser of two evils for the managed care industry. It’s not even close.”

The turnaround in health insurers’ prospects has been stunning. And it can be charted in the stock market. Health insurers’ stock prices bottomed out on June 15 — the same day President Obama promoted his health reform proposals before the American Medical Association, and when debate kicked off in the Senate.

Since then, stock prices of the major companies have been on a relatively steady climb. WellPoint’s shares are up 16 percent, UnitedHealthcare’s have risen 20 percent, Humana’s are higher by 24 percent and Aetna’s have surged 30 percent.

All health insurers enjoyed a particularly big bump the day after Sebelius made her comment in an interview on CNN.

In its Aug. 6 issue, BusinessWeek magazine splashed its cover with the headline, “The health insurers have already won.” And that was before many perceived the public option to be on the ropes.

The article documented how health insurance lobbying had already gotten Congress to move away from proposals that the public plan pay doctors at the below-market rates of the Medicare program.

Also, negotiators in the Senate Finance Committee have gradually watered down benefits that they would require of health insurers. In the spring, senators planned to make health insurers pay for 76 percent of their customers’ medical bills. Now the percentage is down to 65 percent.

The Senate Finance Committee is also the group pushing the co-op idea, projecting that various regional co-ops would attract a combined 12 million customers when they launch. It’s not clear, however, if that many customers would be enough to put pressure on health insurers.

WellPoint alone has 33 million customers, more than any other U.S. health insurer.

“Depending on the rules, managed care could do quite well with co-operatives,” wrote Les Funtleyder, a health care analyst at Miller Tabak & Co., in an e-mail to clients.

Even so, WellPoint is keeping its dukes up. It doesn’t like the co-op idea, and worries that, like the government-run plan, regional co-ops might charge premiums and pay doctors at below-market rates.

“WellPoint read the administration’s recent comments on the government-run health plan with interest,” company spokeswoman Kristin Binns wrote in a statement. “The legislation as currently drafted includes a government-run plan which we oppose. It does not include language specific to a co-op, which makes it difficult to determine how such a proposal would differ from a government-run plan and how it would not have a competitive advantage over private plans.”

In recent days, Obama aides have insisted that they are just as committed to the public plan as before. Sebelius’ comments were quite similar to one made by White House chief of staff Rahm Emanuel on July 6 in an interview with The Wall Street Journal: “The goal is to have a means and a mechanism to keep the private insurers honest,” he said in the interview. “The goal is non-negotiable; the path is.”•

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