WellPoint’s 3Q Profit More Than Doubles
By The Associated Press
The New York Times
October 26, 2005
WellPoint Inc. on Wednesday said earnings for the third quarter more than doubled as the company continued to reap the benefits of last year’s merger creating the largest health insurer in the U.S.
The company was formed last November when Indianapolis-based Anthem Inc. bought Thousand Oaks, Calif.-based WellPoint Health Networks Inc. and changed its name to WellPoint Inc.
(Third quarter) net income rose to $640.7 million, or $1.02 per share, from $242.1 million, or 85 cents per share.
Improvement at the company’s health-care segment was driven by strong membership growth, moderating medical costs in the current year, and synergies realized from the WellPoint-Anthem combination.
WellPoint is in the process of acquiring WellChoice, parent of Empire Blue Cross and Blue Shield. For 2006, WellPoint said it remains committed to its goal of achieving 15 percent growth in net income per share, not taking into account any effect from the WellChoice acquisition or from expensing stock options.
http://www.nytimes.com/aponline/business/AP-Earns-WellPoint.html
Comment: Why should we care about another ho-hum report on the profits of the nation’s largest health insurer? Well, theoretically, as health care consumers we are paying WellPoint and the other insurers for the services that they provide. So it’s fair to ask what benefits we are receiving from this very expensive, highly profitable enterprise. (Although I’ll use WellPoint in this discussion, the principles apply generally to the entire private insurance industry.)
Health care coverage in the United States is heavily dependent on employment-based plans. Our national and state policies are designed to protect and nurture this important sector of health care coverage. Policies have been established to be certain that this industry thrives, even if more and more burdens are being placed on employers and their employees. Without healthy insurers, our system of funding care would collapse (unless structural reform were enacted).
So who is covered under employer-sponsored plans? The nation’s workforce. These are comparatively young, healthy, gainfully employed individuals and their young, healthy families. Insurance is about pooling risk wherein the large numbers of healthy individuals pay into a pool to cover the high costs of the few with major health problems. But employment-based coverage segregates this very large sector of primarily healthy individuals and places them into a separate low-cost pool. So we have presented, on a silver platter, to the private insurance industry this highly lucrative sector, while relieving them of the need to cover most of us who do have significant health care needs.
What about private individual coverage? The story is much worse. The higher administrative costs of the individual market drive rates up to about 30% higher than comparable group coverage. Since these costs would make individual coverage unaffordable, the industry has responded by shifting costs from the insurer to the individual patient. Everyone is aware of the impact that this has had on individual bankruptcy, in spite of having insurance coverage. Even more alarming, the private insurers have been quite successful in excluding those with needs from individual coverage, either by exorbitant premiums or by underwriting exclusions. Once again, our policies have allowed the private insurance industry to skim off the healthy, leaving the sick behind.
Is the private insurance industry helping us to fund the care of those who do have significant needs? End of life care is shifted to the taxpayers through the Medicare program. Many of those with chronic disabilities are shifted to the Medicare and Medicaid programs. The uninsurable theoretically are shifted to high-risk pools, but they don’t exist in many states, and are non-accessible because of minuscule quotas and high premiums in most other states. Some low-income individuals with a high incidence of health care disparities are covered by the taxpayer-funded Medicaid program. And 46 million, mostly employed, low-income individuals, are not served by the private plans simply because they do not have the funds to support the insurance industry.
If the private insurers are avoiding risk pooling and are shifting costs to patients, then what are they selling us? Administrative services! Hundreds of billions of dollars in administrative services (though some of that is the wasteful administrative burden that they place on the health care delivery system).
WellPoint’s $641 million profit this quarter, annualized with the projected 15% increase means that WellPoint will have almost $3 billion in profits next year. But that number is dwarfed by the cost of the egregiously wasteful administrative services that they are foisting off on us.
19% of health care in the United States is funded through employer-sponsored plans. The other 81% is through public programs and private spending. Yet our legislators take far better care of the private insurers than they do us.
The insurers shun the sick, steal our money, and Congress and our state legislators want to keep them in charge!?