Anthem increases its hold on Indiana

The rich keep getting richer in the world of Indiana health insurers.

Anthem Insurance Co. added nearly 75,000 commercial customers last year, pushing its total up more than 4 percent. Anthem,
a subsidiary of Indianapolis-based WellPoint Inc., now claims a whopping 1.8 million commercial customers in the state.

The trouble is, Anthem's dominance limits price competition, according to benefits brokers, making it hard for local
HMOs such as M-Plan or even some national players to compete.

Two of Anthem's competitors–Pennsylvania-based Cigna Corp. and Minnesota-based UnitedHealthcare–grew faster in percentage
terms than it did last year. But neither has built a customer base rivaling two other companies that are exiting the Indiana
scene.

Indianapolis-based M-Plan is winding down its health maintenance organization and recommending Anthem to its customers. Through
its HMO and a provider network, M-Plan could negotiate health care prices on behalf of 705,000 customers.

Carmel-based Sagamore Health Network sold to Cigna last year. Sagamore, a provider network, did not provide insurance, but
did negotiate health care prices for more than 600,000 customers.

But Cigna added far less than that to its customer rolls by year's end. It claimed 435,000 Hoosier customers, but it
provides insurance or benefits administration to less than half of them.

More competition would help keep prices lower, said Greg Wright, an independent insurance broker in Indianapolis. Health
insurance premiums average 11 percent higher in Indiana than in other states, according to a 2006 employer survey by Illinois-based
Hewitt Associates. It cost $8,606 per employee that year to pay for health insurance in Indiana, Hewitt said.

Meanwhile, other national players have reduced their marketing presence in Indiana in recent years, Wright said.

For example, Hartford, Conn.-based Aetna Inc. and Louisville-based Humana Inc. saw the number of their fully insured customers
slip last year.

"We'd like you back. We'd like the competition," Wright said.

M-Plan, which is owned primarily by the Clarian Health hospital system, will receive a commission for each of its customers
who transfers to Anthem. Anthem will pay M-Plan at least $15 million, according to regulatory filings.

M-Plan shed 25,000 customers last year. Anthem officials said they expect to gain 50,000 customers from M-Plan.

After M-Plan's denouement, locally based Advantage Health Solutions Inc. will be the only sizable HMO serving central
Indiana. In 2007, the hospital-owned HMO grew its membership 3 percent, to 62,500.

UnitedHealthcare grew 19 percent last year, its second straight year of double-digit growth. UnitedHealthcare also owns Indianapolis-based
Golden Rule Insurance Co. and Lafayette-based Arnett HMO.

UnitedHealthcare now ranks No. 2 in Indiana's health insurance market. But Anthem is still four times larger.

"Anthem, they're the 800-pound gorilla in the marketplace," said Mike Campbell, managing partner of employee
benefits in Indiana for Neace Lukens, a Louisville-based benefits consultant.

Campbell and Wright said Anthem is hard to beat because it has one of the best networks of health care providers. In addition,
its clout allows it to negotiate better discounts than most or all of its peers. And it has exclusive use of the Blue Cross
& Blue Shield brand name.

"What do you think when you think health insurance? Blue Cross and Blue Shield," Campbell said. "It's
like calling facial tissue Kleenex."

Anthem claims 35 percent of all insured Hoosiers and roughly 60 percent of all Hoosiers who hold commercial health insurance.

Some insurers gain an advantage over Anthem by being more flexible when employers want to customize their health benefits
program, Wright said. He particularly likes Illinois-based Trustmark Insurance Co.

Flexibility also is key for employers that insure their own employees, then hire a company as administrator, Campbell said.

Cigna tried to position itself to compete with Anthem's network when it acquired Sagamore in July.

"Acquiring Sagamore has bolstered our competitive position in the region and strengthened the Cigna HealthCare network,"
Cigna spokeswoman Kathleen Keenan wrote in an e-mail. "In addition, it has given us the opportunity to introduce ourselves
to a new membership base."

In 2005, Aetna acquired two provider networks that serve parts of Indiana. But PPOM and Flora Health Network have not brought
Aetna many Hoosier customers. Aetna saw its customer base decline 5 percent last year, to less than 216,000.

Meanwhile, Anthem kept gaining in both the commercial and government markets. After winning a contract with the Indiana Medicaid
program in 2006, it added 120,712 Medicaid customers last year. In addition, over the last three years, Anthem has gradually
added 17,000 customers by selling Medicare-supplement products.

When its Medicare, Medicaid and federal government employees are added in, Anthem claimed 2.1 million Indiana customers in
2007. That marked a 13-percent increase over the previous year.

"We see it as a reflection of Anthem continuing to offer and expand on a leading suite of products that employers appreciate
and value," said Anthem spokesman Tony Felts.

Anthem's 2007 profit from its Indiana business surged 8 percent, to $265.5 million, compared with a year earlier. Those
numbers do not include investment gains, which dropped precipitously from $609 million in 2006 to $94 million last year.