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WellPoint pays big to tap fast-growing Medicare market

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Analysts raised their eyebrows at the $800 million reportedly paid by WellPoint Inc. to acquire a West Coast Medicare plan, but with the commercial health insurance business stagnating, Medicare is vital to WellPoint’s future growth.

Indianapolis-based WellPoint will acquire California-based CareMore, which operates senior-focused medical clinics and covers about 55,000 seniors under the Medicare Advantage health plan, in which the federal government contracts with private health insurers to cover seniors’ health care. CareMore has doubled its customer rolls in the past four years.

“WellPoint acquired an attractive business that has grown substantially in the past few years, but they paid up to do it,” Citibank analyst Carl McDonald wrote in a June 8 research report about the deal. He and other analysts noted that the reported purchase price, which WellPoint would not confirm, punches out to nearly $15,000 per insured customer.

Previous acquisitions of Medicare Advantage plans have been priced at an average of less than $6,000 per insured member.

Of course, CareMore also operates a series of senior-focused medical clinics in six counties in California, as well as newer operations in Arizona and Nevada. WellPoint said it will invest any profits from CareMore—which analysts estimated at $30 million to $50 million annually—into launching more clinics in 2012.

Also, WellPoint can tap the experienced managers at CareMore to help grow its heretofore lackluster Medicare Advantage business, noted Barclays Capital analyst Joshua Raskin.

WellPoint provides health insurance to 33 million Americans—more than any other company. But it has only about 550,000 members in its Medicare Advantage plans, ranking fourth nationally. According to analysts’ estimates, Medicare Advantage accounts for less than $5 billion of WellPoint’s nearly $60 billion in annual revenue.

WellPoint CEO Angela Braly acknowledged during a February conference with investors that WellPoint has struggled at capturing Medicare customers in the past, and signaled the company was likely to make an acquisition to help it grow in that segment.

“We think Medicare, demographically, is an opportunity for us. We haven’t captured the market share that we could there,” WellPoint CEO Angela Braly told investors in February.

She also laid out WellPoint’s projections that, by 2015, employer-sponsored plans nationally will actually lose 5 million members while Medicare plans add 19 million members.

Raskin, writing in a June 8 research note, said the CareMore management team should be able to help WellPoint do a better job capturing that growth.

He wrote that WellPoint “has spoken on numerous occasions about pressures on its earnings in that [Medicare Advantage] segment in recent years. It appears that there has been a lot of volatility in that segment’s contribution historically. We believe that the CareMore team will bring much needed experience, strategy and operational focus.”

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  • well of course...
    ...Anthem wants to profit off Medicare, like any good crony capitalist company they want to suck as many $$$$ off the govt. teat as possible, the don't call it WELL-fare for Repuglicans fer nothin'...it's who they are, it's what they do!

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  1. Now if he'd just stay there...

  2. Daniel - what about the many US citizens who do NOT follow what the Bible teaches? The Hindus, Jews, Muslims and others who are all American citizens entitled to all rights as Americans?? This issue has NOTHING to do with "What the Bible says..." Keep all Churches separate from State! Pence's ongoing idiocy continues to make Indiana look like a backwards, homophobic state in the eyes of our nation. Can't we move on to bigger issues - like educating our kids?

  3. 1. IBJ should link to the referenced report. We are in the age of electronic media...not sharing information is lazy. Here is a link http://www.in.gov/gov/files/Blue_Ribbon_Panel_Report_July_9_2014.pdf 2. The article should provide more clarity about the make-up of this panel. The commenters are making this item out to be partisan, it does not appear the panel is partisan. Here is a list of the panel which appears to be balanced with different SME to add different perspectives http://www.in.gov/activecalendar/EventList.aspx?view=EventDetails&eventidn=138116?formation_id=189603 3. It suggests a by-pass, I do not see where this report suggests another "loop". 4. Henry, based on your kneejerk reaction, we would be better off if you moved to another state unless your post was meant as sarcasm in which case I say Well Done. 5. The article and report actually indicates need to improve rail and port infrastructure in direct contradiction to Shayla commentary. Specifically, recommendation is to consider passenger rail projects... 6. People have a voice with their elected officials. These are suggestions and do not represent "crony capitalism", etc. The report needs to be analyzed and the legislature can decide on priorities and spending. Don't like it, then vote in a new legislature but quit artificially creating issues where there are none! People need to sift through the politics and provide constructive criticism to the process rather than making uninformed comments in a public forum based on misinformation. IBJ should work harder to correct the record in these forums when blatant errors or misrepresentations are made.

  4. Joe ... Marriage is defined in the Bible ... it is mentioned in the Bible often. Marriage is not mentioned once in the US or Indiana Constitution ...

  5. Daniel - Educate me please: what does the Bible have to do with laws? If the government wasn't in the business of marriage to begin with, then it wouldn't have to "define" marriage at all. Marriage could be left as a personal, religious, or otherwise unregulated action, with no ties to taxes, legal status, etc. Then people could marry whomever they want, and all this silliness would go away. Remember to vote Libertarian in November.

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