Private exchange could boost WellPoint profits

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WellPoint Inc.'s participation in buying a majority stake of the private health insurance exchange operator Bloom Health could help it get back to its roots as a health insurer—and make a bit more money in the process.

The Indianapolis company joined with two not-for-profit health insurers on Sept. 20 to acquire Minnesota-based Bloom, which started two years ago and now has 50 employers with 20,000 workers buying health coverage in its exchange.

Come 2014, the Bloom exchange will compete with the state-based exchanges required to launch under the 2010 health reform law.

The exchange concept—whether private or public—would allow employers to give their workers a defined amount of money and then allow them to shop for coverage in the exchange marketplace, which in the state-based exchanges would require minimum amounts of coverage, standard features for easy comparisons, and even taxpayer-funded subsidies for low- and moderate-income families.

WellPoint officials say the private exchange would be more appealing for large multistate employers who might be reluctant to deal with 50 different sets of rules in the state-based exchanges.

If WellPoint can attract large employers who fund their own health benefits (and hire WellPoint as an administrator), the company could convert those accounts from low-margin “administrative services only” to high-margin “fully insured” business, in which it also gets paid for taking on the financial risk of the plan.

“The basic plan is to allow employers groups to convert from group coverage to individuals buying their own coverage through a defined-contribution approach,” Joshua Raskin, an analyst at Barclays Capital, wrote in a Sept. 28 note to investors. He added, “You can convert large self-funded accounts to risk-based accounts, which will likely lead to higher-dollar profits.”

Such a shift would reverse a recent trend that has seen more and more employers becoming self-funded, paying WellPoint only to process claims rather than to bear the financial risk as well. Also, during the recession, WellPoint has been more successful at keeping large employers, which more often are self-funded, than it has been at keeping small employers, which more often are fully insured.

At the end of June, just 40 percent of the 34.2 million members in WellPoint’s health plans were in fully insured plans. The remainder were in self-funded plans.

Four years ago, WellPoint’s members were evenly split between the self-funded and fully insured arrangements.


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  1. Yes sir keep cashing those 300K a year checks direct to IMS, while millions disappear from the teams like Rahal's. Guess there wasn't enough ka- ching going around to keep Sarah Fisher in business without their "merger". LOL._____.Meanwhile back in Realville the series with the "best racing in the world" drew what appeared to be about 5000 live spectators ( and probably 1500 of those Target "freebies", and was beaten in the ratings by a series that reportedly consists of "parades" and aired while most people are still sleeping. That will generate those big ka-chings for sure. :-). But, hey, as long as the Speedway gets the cash who gives a damn about the teams?

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