WellPoint spends $50M to burnish brand

Back to TopCommentsE-mailPrintBookmark and Share

WellPoint Inc. is spending $50 million this year on branding work in an effort to burnish its image before the launch of health insurance exchanges in 2014. And it probably will spend just as much next year, too.

That’s because the Indianapolis-based health insurer expects the future purchase of health insurance to function more like online retailing than ever before, where brand name, along with price and convenience, win the day.

WellPoint’s Blue Cross and Blue Shield plans have one of the most recognizable brand names around in health insurance. But WellPoint is taking nothing for granted.

“As you think about 2014, you’re going to have to market in a more retail environment, something that this industry hasn’t had to do historically, and branding is going to become more relevant,” said Wayne DeVeydt, WellPoint’s chief financial officer, at a Sept. 10 talk with investors in New York.

Also, WellPoint has run simulation programs with more than 22,000 of its 34 million customers to test possible products it could sell on the exchanges. WellPoint has been evaluating what those customers valued the most: price, brand, doctors in the network and other factors.

Next year, WellPoint will pilot some of those exchange-like products in real-life tests, to see if consumers react the same way they did in the simulations. The exchanges, called for in the 2010 Patient Protection & Affordable Care Act, will be online marketplaces for insurance run by the state or federal governments.

“While simulation was done with real consumers, it’s always different when they’re actually having to make the buying decision and it’s a dollar out of their pockets,” DeVeydt said.

The reason WellPoint is taking the exchanges so seriously is that they could substantially replace the existing markets for individual and small-employer insurance. WellPoint makes more money from those customers than from large employers because it actually takes on the financial risk if the cost of individuals’ or small employers’ claims spike.

So-called “fully insured” customers make up the lion’s share of WellPoint’s profits, even though they account for only 40 percent of its revenue from non-government sponsored programs. Large employers are typically “self-insured,” and hire WellPoint only to negotiate discounts with doctors and process patients’ claims.

That will make WellPoint more vulnerable than most big health insurers when the exchanges launch in 2014. Insurers will no longer be able to charge unhealthy individuals and companies significantly higher premiums, and its overhead for those customers is now capped at 20 percent of premiums.

So to keep its profits from plunging, WellPoint must gain a big chunk of the 24 million Americans predicted to flood into the exchanges.

“You’ll see [profit] margin compression, and then you’ll offset some of that compression with the new members that are coming in to the system,” DeVeydt said. “But net-net, we believe that's the bucket that will be slightly backwards and down in year one, and then you’ll kind of grow off of that.”



Post a comment to this story

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

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.