Amid Obamacare's changes, WellPoint keeps old playbook

July 25, 2013
Back to TopCommentsE-mailPrintBookmark and Share

Between Obamacare and new CEO Joe Swedish, everything is new at WellPoint Inc.

But for all the changes, the company is still sticking to its same old playbook.

Offer more choices of doctors and hospitals than other insurers. Hawk that broader choice to attract more customers. Use that large number of customers to exact lower prices from hospitals and doctors. Pocket a tidy profit. Repeat.

Now that Obamacare is bringing us online exchanges to replace the individual insurance markets, all health insurers are launching new health insurance products built on “narrow networks”—a smaller number of doctors and hospitals that agree to offer discounted rates than the broad networks that consumers have preferred for the past 15 to 20 years.

Why? Because insurers think buyers in the exchanges will be extremely price sensitive. And the insurers think they can get lower prices from doctors and hospitals if they promise more patients will come to them.

Providers believe they actually will get more patients in narrow network plans because some of their competitors won't be covered—or at least will be covered at significantly higher costs to the patients.

This is a big change in direction for WellPoint, whose Blue Cross and Blue Shield plans typically included just about every doctor and hospital in the 14 states in which WellPoint operates.

But even as WellPoint makes this shift, it is merely adapting its old playbook to the new rules of the game.

I say this because it now looks like WellPoint’s narrow networks are going to be a little less narrow than at first thought.

“We believe our networks, while narrower than those in our legacy commercial products, have the patient volume capacity to support strong membership growth relative to smaller networks we have observed [from our competitors],” WellPoint CEO Joe Swedish told Wall Street analysts during a Wednesday conference call.

Translation: We’re not including as many doctors and hospitals as we do in our employer health plans, but we’re including more than the other guys because, that way, we’ll attract more customers than our competitors.

In Indiana, WellPoint disclosed an “exclusive” agreement in January with Community Health Network as the hospital and physician system that would provide care for WellPoint’s exchange customers in central Indiana. However, WellPoint has since been talking with other hospital systems—St. Vincent Health, Wishard Health Services and the Suburban Health Organization—about joining its narrow network plan for the exchanges.

WellPoint has yet to publicly announce which providers have signed a contract to participate in the health plans it will sell on the Obamacare exchanges.

But not only is WellPoint pursuing, if you will, broader narrow networks. Swedish also thinks that, in the long run, WellPoint's success at attracting patients will allow it to get even bigger price cuts from providers.

That probably will elicit a laugh or cry from doctors and hospitals. An Indiana physician once described the rates paid by WellPoint in Indiana as on par with the prices at a Wal-Mart lunch counter.

But WellPoint is serious.

Previously, WellPoint officials had said they were looking for reimbursement rates for these narrow network plans that were about 8 percent to 10 percent lower than WellPoint's more common broad network plans.

But Swedish hinted that reimbursement rates could go even lower than that—closer to the rates paid by the federal Medicare health plan for seniors.

“We think that over time that rates are going to migrate somewhere between Medicare and commercial and be more biased over time towards the Medicare rates,” Swedish said on Wednesday.

How much lower are Medicare rates than commercial insurance? About 30 percent, according to a large 2008 study by the actuarial firm Milliman Inc.

Color me skeptical about WellPoint's ability to form not-so-narrow networks and yet command even bigger price concessions from doctors and hospitals. It seems like letting more providers in would weaken its bargaining power, not strengthen it.

But Swedish is so bullish on WellPoint’s ability to attract customers in the exchanges, he thinks WellPoint will have so many patients, that providers will be compelled to play ball. Just like they did before.

“Now the only way to do that is to have narrower networks, which we have accomplished,” he said, “and to havethe willing participants which we have because of the volume we think we can bring to them.”

ADVERTISEMENT

Post a comment to this blog

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
  1. John, unfortunately CTRWD wants to put the tank(s) right next to a nature preserve and at the southern entrance to Carmel off of Keystone. Not exactly the kind of message you want to send to residents and visitors (come see our tanks as you enter our city and we build stuff in nature preserves...

  2. 85 feet for an ambitious project? I could shoot ej*culate farther than that.

  3. I tried, can't take it anymore. Untill Katz is replaced I can't listen anymore.

  4. Perhaps, but they've had a very active program to reduce rainwater/sump pump inflows for a number of years. But you are correct that controlling these peak flows will require spending more money - surge tanks, lines or removing storm water inflow at the source.

  5. All sewage goes to the Carmel treatment plant on the White River at 96th St. Rainfall should not affect sewage flows, but somehow it does - and the increased rate is more than the plant can handle a few times each year. One big source is typically homeowners who have their sump pumps connect into the sanitary sewer line rather than to the storm sewer line or yard. So we (Carmel and Clay Twp) need someway to hold the excess flow for a few days until the plant can process this material. Carmel wants the surge tank located at the treatment plant but than means an expensive underground line has to be installed through residential areas while CTRWD wants the surge tank located further 'upstream' from the treatment plant which costs less. Either solution works from an environmental control perspective. The less expensive solution means some people would likely have an unsightly tank near them. Carmel wants the more expensive solution - surprise!

ADVERTISEMENT